Ratio Utility Billing System (RUBS)

49 Replies

Has anyone use RUBS (ratio utility billing system) on a small multifamily property (say 10 units or less)?  Is it cost effective for smaller units?  What are your thoughts/experiences?  Thanks!

...in its simplest form, you just divvy up the water bill 10 ways....watch water usage drop.  Its a no-brainer, imo.  You just have to get the old tenants on board....and massage the message, so you don't lose your good tenants.  If they think it will drop the overall costs of living at the property, they will participate.  

Are landlords paying water included in the rent in other buildings for the area? If it's norm for the landlords to pay it you will have a tough time to get the tenants to pay.

If others are using RUBS then you can try it. The problem with dividing the water bill up equally is some tenants will fight that saying other tenants are consuming more water then they are. Also if you have leaks in one unit and not the other then the other tenants are paying for that.

There are services that put a private meter on each unit so the tenants are billed on what each consumes  versus averaging out. It's common when you do these water payments that a few will pay the rent but not the water bill in protest.   

Not having individual meters is simply unprofessional. A smart tenant will avoid a property setup like this. It really is not hard to install submeters in most cases.

I'm not sure if the OP is talking just about water, heat, electric etc. Just last year I had a company from Salt Lake City install a metering system for heat on my 12 plex. I thought about RUBS but decided on submetering for reasons stated above. It has been great. There was a small installation charge of $100/unit. They now monitor the heat usage each month and send a bill to the tenants calculated from their usage and corresponding share of the gas bill. They charge a $5/mo fee to each tenant included in the bill. The submetering company does not collect the payments though. They get sent in to my manager with the rent.

 There is one central steam boiler for the whole building, and I was on the hook for the whole gas bill in the past. I started with the tenants paying half of their heat usage. Each apt has its own steam loop and thermostat, so they just installed run time meters on each apartment's steam valve and calculate the gas usage from that. I got the tenants on board by promising not to raise the rent that year. We had to include language in their contracts when they renewed last summer detailing the terms of the deal. They have been paying reliably. As with all things, they could bail if they had better options, but my rents are on the low side so overall they still have a good deal. 

One of the side benefits is that the tenants now have skin in the game so to speak, and my gas bills have gone down a bit.

What kind of heating system do you have in your property?

To support some of the challenges some residents may have that feel they conserve while others don't, you can also take the # of occupants and the square footage and come out w/a higher ratio for larger units w/more people.  That helps a bit.  You certainly would not want to allocated 10 units equally if number of residents and size were unique IMO.

Here's a helpful link for those new to the concept:

http://www.multifamilyutility.com/rubs.html

Originally posted by @David Thompson :

To support some of the challenges some residents may have that feel they conserve while others don't, you can also take the # of occupants and the square footage and come out w/a higher ratio for larger units w/more people.  That helps a bit.  You certainly would not want to allocated 10 units equally if number of residents and size were unique IMO.

Here's a helpful link for those new to the concept:

http://www.multifamilyutility.com/rubs.html

 The more units you have, the more useless RUBS becomes. That is why it is illegal in so many places - it's a totally made up number. You're just begging smart tenants to run away.

It's not "the way to go" anywhere. It's unprofessional everywhere and illegal in some places. It has nothing to do with your competition. Just because the neighbor is a slumlord doesn't mean you should be too.

Submeters are too cheap for you to have any excuse. Especially on 10 or more units. It's bad enough not to meter a duplex - anything bigger is absolutely absurd.

Ryan,

RUBS is used in about every 100+ unit apartment building I look at in Texas and if its not used, its one of the first value add things we look at.  It's not illegal.  It's not unprofessional.  You have to work w/the utility companies so why would that be illegal ?  What it does do is put the burden on the user to be more energy efficient.  My mentor once told me that when he really got sold on the RUBS system is when he went into one of his units in the heat of the summer in Texas and the guy had the AC on 60d sitting on the couch w/a blanket.  Right then and there he realized all bills paid was not only an economic burden but it did not put the incentive in the right place, w/the user and was not good for the environment.  After he implemented the RUBS, he actually reduced the rent a bit to enable the user to adjust to the new extra billing.  It has nothing to do w/being a slumlord or a bad landlord.  It's all about empowering the user and if one of the residents is not energy efficient, why should everybody pay for it in higher rents for all.

Originally posted by @David Thompson :

Ryan,

RUBS is used in about every 100+ unit apartment building I look at in Texas and if its not used, its one of the first value add things we look at.  It's not illegal.  It's not unprofessional.  You have to work w/the utility companies so why would that be illegal ?  What it does do is put the burden on the user to be more energy efficient.

You've got things backwards. No, it's not used on every 100+ unit building in Texas. The more units you have without meters, the more unprofessional you look. Even in Texas. A 100 unit building needs meters, anything less is purely stupid. It makes your building worth less, it makes it harder to sell, and it makes it harder to rent.

No, RUBS aren't illegal in your area, but the fact that they are illegal in many areas proves it is a bad idea. Why would it be illegal otherwise? No, RUBS does not make a tenant responsible for their usage. They can still be extremely wasteful and it will have next to no impact on them. In fact, the more people you are dividing the bill across, the less RUBS gives you an accurate number for each person.

A 100+ unit building without meters is the territory of a slumlord. And whoever built that place without meters is an idiot. You seem to think the other option is to simply allow unmetered utilities - that is just as stupid. The only effective and useful way to do it is to measure each tenant individually, and there is no good excuse not to. Meters are way too cheap!

If you could say it cost a thousand dollars per meter you might have a point, but water, gas, and electric meters are all well under $100 each!

Originally posted by @Carlos Flores :

For Texas  SUBCHAPTER H: UTILITY SUBMETERING AND ALLOCATION §§291.121 - 291.127 Effective January 6, 2011 - https://www.tceq.texas.gov/assets/public/legal/rul...

 What's your point, and when did this become a thread about Texas? 

Yes, RUBS is not illegal in Texas. It's still highly unprofessional slumlord tactics. Properly and professionally managed property in Texas has meters for every unit.

Again, I'll point out meters are well under $100 each. More like under $50 each. There is NO EXCUSE for not installing them! They will always pay for themselves in cost savings - for both the tenant and the landlord!

Originally posted by @Account Closed :
Originally posted by @Carlos Flores:

For Texas  SUBCHAPTER H: UTILITY SUBMETERING AND ALLOCATION §§291.121 - 291.127 Effective January 6, 2011 - https://www.tceq.texas.gov/assets/public/legal/rul...

 What's your point, and when did this become a thread about Texas? 

Yes, RUBS is not illegal in Texas. It's still highly unprofessional slumlord tactics. Properly and professionally managed property in Texas has meters for every unit.

Again, I'll point out meters are well under $100 each. More like under $50 each. There is NO EXCUSE for not installing them! They will always pay for themselves in cost savings - for both the tenant and the landlord!

Can you make some recommendations on how you'd handle retrofitting sub-meters on older, larger properties with central boilers?  Are meters for hot water lines more expensive than for cold lines?  Wait, are you saying I'll need two per unit?  The water company also charges me for sewage.  How much are those meters?  That's three meters each ... would you add them, why or why not?  What's the price difference between the manual ones and those fancy broadcasting ones?  Do you have to bust a hole in the wall or dig holes everywhere - how much does that cost?  What would you estimate the additional labor hours to be annually for reading, processing, etc?  I'm sure I missed something.  Can you base you answers on a 300 unit property built in the 1960s?

Originally posted by @Carlos Flores :

Can you make some recommendations on how you'd handle retrofitting sub-meters on older, larger properties with central boilers?  Are meters for hot water lines more expensive than for cold lines?  Wait, are you saying I'll need two per unit?  The water company also charges me for sewage.  How much are those meters?  That's three meters each ... would you add them, why or why not?  What's the price difference between the manual ones and those fancy broadcasting ones?  Do you have to bust a hole in the wall or dig holes everywhere - how much does that cost?  What would you estimate the additional labor hours to be annually for reading, processing, etc?  I'm sure I missed something.  Can you base you answers on a 300 unit property built in the 1960s?

So in other words you want me to do all your homework for you? No thanks, I have other things to do.

Central boilers are monitored with BTU meters, these are also very cheap. A temperature sensor is placed on the incoming and outgoing hot/cold water lines to determine the BTUs consumed. Also cheap. Nobody in the world has a sewage meter, it's based on the water use since all water used has to go down a drain eventually.

In order to install a meter you need to access the line feeding the unit. Each apartment should have it's own water, gas, and electric shut off anyway, this is an ideal place to install meters. If you don't have those shut offs you should install them also. 

Every building is different. This is a cost that should be considered before ever purchasing a building. I would imagine an unmetered 300 unit building from the 60s would save MASSIVE amounts of money by installing meters.

Over many decades it was COMMON not to have separate water. Back then water was so cheap that developers of multifamily buildings just included in the rents.

Today is a different time and place so water is called "liquid gold". Tenants use about 30% percent on average more water when they do not pay it directly. In addition they are slow to report minor leaks or at all as it doesn't typically impact them financially.

Landlord paid utilities with multifamily can be a real cash flow killer if not handled efficiently.

So most larger buildings I come across that are vintage almost everything is separated out except for the water. Water not being separated out is most common. The other utilities not you rarely see at least in my area.     

I'd like to add to the above by saying that RUBS billing is the single smartest, most intelligent improvement we've ever made as Property Managers.   It's a win-win all around.  

First we directly pay all the duly owed utility bills, but then we re-bill to the Tenants on a % of square footage basis as a "recoverable." (To borrow from a Commercial Real-Estate Term)

  • It keeps our rents a wee-bit lower and thus makes our units easier to rent & more competitive for our rental-brokers
  • Also, since rents are lower, it's a win for our Tenants who get to pay less in rent.
  • Obviously, our running property costs have gone way, way down. This adds to our bottom line
  • The environment gains - and by extension, ALL OF US - since waste & excess literally drop off of a cliff. Clients now only use what they need & not much more.

We have it duly written into all of our Leases, so it's fully disclosed and we engage all prospective Tenants in an honest conversation about paying all of their bills before they move in.  All their bills are transparent and include the Utility Bill for the entire building with an easy to understand breakdown of the pro-rata charges.

These 'recoverables' or 'reimbursements' are simply added to the Tenants' monthly rent bill as "Added Rent" which our Tenants have been happily paying for years.

I can't say we've ever had even a single problem implementing this.  Tenants are the ones using these services, why shouldn't they pay for it?  What's the problem?

This is a no-brainer!

Originally posted by @Brooklyn R.:

I'd like to add to the above by saying that RUBS billing is the single smartest, most intelligent improvement we've ever made as Property Managers.   It's a win-win all around.  

First we directly pay all the duly owed utility bills, but then we re-bill to the Tenants on a % of square footage basis as a "recoverable." (To borrow from a Commercial Real-Estate Term)

  • It keeps our rents a wee-bit lower and thus makes our units easier to rent & more competitive for our rental-brokers
  • Also, since rents are lower, it's a win for our Tenants who get to pay less in rent.
  • Obviously, our running property costs have gone way, way down. This adds to our bottom line
  • The environment gains - and by extension, ALL OF US - since waste & excess literally drop off of a cliff. Clients now only use what they need & not much more.

We have it duly written into all of our Leases, so it's fully disclosed and we engage all prospective Tenants in an honest conversation about paying all of their bills before they move in.  All their bills are transparent and include the Utility Bill for the entire building with an easy to understand breakdown of the pro-rata charges.

These 'recoverables' or 'reimbursements' are simply added to the Tenants' monthly rent bill as "Added Rent" which our Tenants have been happily paying for years.

I can't say we've ever had even a single problem implementing this.  Tenants are the ones using these services, why shouldn't they pay for it?  What's the problem?

This is a no-brainer!

 Is the monthly "added rent" (ie RUBs billback) the same each month, or is it based on usage the previous month? Do you have a breakdown of how you calculate it?

The "added Rent" is simply what ever each tenant's portion of that month's bill is. Since the Utility Bill will change each month, each tenant's portion will also change each month....

Easy Example: Say we manage a 2 family with 6 tenants/residents in total: 4 people living upstairs in Unit 2,  and 2 people living downstairs in Unit 1:  

If January's water bill for the whole building is $100, then 

  • February's Rent for Top Floor Unit 2 would have an extra $100 x 4/6th (or 2/3 rds) added on = $66.66
  • February's Rent for Bottom Floor Unit 1 would have an extra $100 x 2/6th (or 1/3 rds) added on = $33.33

I always send each Tenant a copy of the entire building's Water bill, plus a cover page with a detailed explanation of the billing-breakdown.

Make sense?

Originally posted by @Brooklyn R.:

The "added Rent" is simply what ever each tenant's portion of that month's bill is. Since the Utility Bill will change each month, each tenant's portion will also change each month....

Easy Example: Say we manage a 2 family with 6 tenants/residents in total: 4 people living upstairs in Unit 2,  and 2 people living downstairs in Unit 1:  

If January's water bill for the whole building is $100, then 

  • February's Rent for Top Floor Unit 2 would have an extra $100 x 4/6th (or 2/3 rds) added on = $66.66
  • February's Rent for Bottom Floor Unit 1 would have an extra $100 x 2/6th (or 1/3 rds) added on = $33.33

I always send each Tenant a copy of the entire building's Water bill, plus a cover page with a detailed explanation of the billing-breakdown.

Make sense?

 I see this costing me 10x as much in time as a property manager as my client will save in utilities. Calls like:

  • "Unit 1 had tons of people over every weekend for parties and clearly uses way more water than us."
  • "Unit 3 has a boyfriend living there most of the time."
  • "Unit 2 uses the hose to wash his car every week for like an hour."
  • "Unit 4 has a ton of plants out front she waters"

"So why am I paying 25% of the water when they [...]"

Per unit, maybe I see that working. Per person sounds like an administrative nightmare.

@Matthew Olszak   - Could be.  In our experience, it comes down to how well the tenants' expectations are managed. If we allow them to act petty, they might. But we don't, so they don't.   The questions tend to come only at the beginning immediately after implementation. After the 1st month or 2, they get used to it and the questions stop completely. 

We once had a tenant in a 4-Family Building ask us a few questions ... not complain.. just 'ask.'   We told her 4 things:   (The tenants were all relatively close and respectful to one another)

  1. "RUBS  isn't unlike Cable TV.... You get billed each month no matter how much TV you watch - or even if you don't watch any TV at all! But it's better, because you still get the benefit all month long"
  2. "You guys are all neighbors and need to realize that you're in this together. The less everyone uses, the less everyone pays. It works best when the building works as a team and everyone is mindful of their usage."
  3. Regardless,  the Utility bill (in this case Water) was significantly lower than prior months and way less (over 40%) than it used to be before RUBS so it was in-fact working and saving them all significant money. 
  4. We then explained that without RUBS, we'd have to much more significantly raise rents to cover the costs and so they'd end up paying much, much, much more at the end of the day. 

#4 shut 'em up really good as they couldn't rebut that one. We never got any questions ever again after that one discussion.

I don't want to get too technical (or risk scaring other Landlords away from RUBS) but either way, don't forget that you needn't implement RUBS based only on the no. of occupants.  You can easily also do it based on, for example: 

  • A.) Each unit's % of total square-footage  
  • B.) Each unit's % of total water-faucets or water-apparatuses (in the case of water)  
  • C.) Each unit's % share of total bedrooms
  • D.) Some other measure.... or some combo of the above or any other fair & equitable method appropriate for your situation.

As long as it's easy, clear and well-explained in writing - and plainly laid out in the Tenants' leases - it will be fine!