Is 1 meter On a Multifamily a major problem?

Question

Im looking at a duplex and a 12 unit.  Both only have 1 meter.  I’ve never had this issue so I’m wondering if it will be best to leave it as 1 meter or pay to get separate ones.

Manuel Rodriguez · Answer

Wow that’s an excellent explanation thank you very much!   So now I can see the possible problems with 1 meter.  I don’t think I want those problems. Now I’m wondering why would the present landlord keep only 1 meter. Is it extremely expensive to add more?

John Teachout · Answer

If you're referring to how one meter works, the landlord gets the bill and pays all the electric (or water)

If you're referring to bill back with a single meter, you would divide the bill in some equitable manner and charge the tenants accordingly. That's the crux of the issue. How do you do it fairly? As a family of two may be really wasteful of resources and actually use more than a very frugal family of five. Do you do it by unit? By the number of people in each unit? By the square footage of the unit? It is difficult to make a strong case that what you charged someone was fair to them and not an overcharge for their actual use. (they maybe paid less than their fair share but you can't know that.) Most people just include the utilities in the rent but that causes waste as since the tenant isn't paying it, what do they care if the toilet is leaking 8000 gallons of water per month?

Another utility issue is whether or not every unit has their own heat, ac, water heater, etc. If not, this becomes an issue for both water and electric.

One other issue, if tenants have their own water/electric accounts, if they don't pay and it gets shut off, they have to deal with that. If the utilities are in the landlord's name, you cannot shut off utilities even if they stop paying rent and the bill will continue to accrue during the perhaps drawn out eviction process.

Manuel Rodriguez · Answer

Yes I heard that landlords can bill back for utilities in the case where there’s only one meter.  But Im most likely gonna pass on the 12 unit.  But I was hoping someone could explain how exactly they bill the utilities on 1 meter.

Angel G. · Answer

@Manuel Rodriguez - that's a great question and one that I too asked several years back when starting my own real estate journey. When developing my own investment criteria, having separated meters for all utilities was must for me. I didn't want to worry about a tenant being careless with their use of utilities and run up a bill that I had to cover. There have been though a few rare occasions where a property had all utilities separated except for water but the numbers were too good to pass up. In that instance I was very conservative with my estimates for what the monthly cost would be in the numbers that I ran. Best of luck!

Mark H. Porter · Answer

Just make sure the electric is part of the expenses when you do your analysis.  It’s no big deal, I have a number of places where I pay electric and I just have the rent at the rate to reimburse me for it.

John Teachout · Answer

Are you referring to electric meters? Water meters?

I would say, yes this is a problem. Not operationally as much as profit wise. There is no incentive to save if one isn't paying for the utilities. And, it's difficult to apportion utilities as there's no way to know who's using what. On the duplex, I would probably split the utilities. On the big unit, I wouldn't buy it if it were me, but it's not me, so you'll have to decide.