Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes
Hi all,
When operating say a ~50 unit multifamily with single water meter, what are some strategies that can be used to offset water bill onto tenants?
The property that I'm underwriting is going through $70/unit each month on unit mix of mostly 2br/1 bath, which is already ridiculously high. I am guessing the toilet/shower are not high efficiency, or maybe there's a leak, well that may be a value add I am more interested in offsetting the remaining cost to tenants
Some more background...
Small town of about 20K people, ~25 min drive away from a large city. Location is B class, low crime, property is B class and pretty sure the tenants are C class.
Here are some things that I want to do, but I want to get your opinion and any other ideas
- charge a flat rate for each unit each month, and obviously this would be written in the lease and tenants would know ahead of time
- charge a rate by sqft, so tenants occupying 750 sqft pays less than 1000 sqft unit, rate is FIXED and known at signing
- charge a rate by sqft, so tenants occupying 750 sqft pays less than 1000 sqft unit, rate is VARIABLE and is calculated from actual water bill
- increase rent price? (hah... this would probably not work for market tenants, maybe for Sec8)
In the above ^, I am hoping to also wrap in trash service in there.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
5y
Yep, you've probably got a leak or many leaks.
All of the potential solutions you've noted for RUBS are viable alternatives. However, only the fixed ones allow you to benefit from solving the underlying problem.
If you have all your residents on a fixed utility bill and then you spend the money to stop the leaks, then you benefit from solving the problem. Otherwise your residents benefit and you won't until it is widely known that your utility costs have come down.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
5y
Yep, you've probably got a leak or many leaks.
All of the potential solutions you've noted for RUBS are viable alternatives. However, only the fixed ones allow you to benefit from solving the underlying problem.
If you have all your residents on a fixed utility bill and then you spend the money to stop the leaks, then you benefit from solving the problem. Otherwise your residents benefit and you won't until it is widely known that your utility costs have come down.
Specialist · Salt Lake City, UT · Member since 2017 · 32 posts · 6 votes
5y
I do utility management as a profession and here are a few suggestions/things to think about.
1. Flat rate billing for water is not advised in all 50 states. If an owner is found to be over-recovering on water, a necessary commodity, it open up grounds for a potential lawsuit. It sums down to “my landlord was profiting on providing us water a necessary condition to make my apartment liveable”. IF you bill a flat rate it needs to be under recovering on the actual monthly expense.
2. RUBs per SqFt is a good practice. More commonly the popular method for water is Rubs per occupant since people use water and not sqft. It will take more work on the property team but will reduce future questions/complains.
3. Most importantly, each state, county, and municipality has its own regulations on utility bill back. Be sure to check yours.
Specialist · Salt Lake City, UT · Member since 2017 · 32 posts · 6 votes
5y
Not necessarily. I don’t know if it has a direct correlation with the growing “young professional” demographic but I think many people would be surprised on how many 1 occupant tenants there are renting larger units or 2 bedrooms units to serve as an office.