Non-Metered Utilities for Potential Apartment Purchase

5 Replies

I'm currently looking at a 40-unit apartment in Indiana but one of the bigger pitfalls is that landlord pays all utilities.  The broker gave me a utility estimate of $5,000 per month (E-$2,000/mo, W=$2,000/mo, G=$1,800/mo) but I don't know how realistic that is.  Also, to separately meter each unit sounds very expensive.  Any thoughts/comments/recommendations?

Medium olddawgslogoBill Manassero, Old Dawg's REI Network | [email protected] | 9493921999 | http://olddawgsreinetwork.com | Podcast Guest on Show #173

Bill,

As you have probably ready on many other posts and no disrespect to agents but depending on them for your DD is risky at best. Rather then giving you an estimate, he should be giving you actual utility bills for the property for the past year along with occupancy levels (monthly). You can then figure out your own monthly expense estimates and how it would change with changes in occupancy.

IF that is not possible, there are industry standards you can use to help estimate but have to be adjusted depending on the utility rate for the area. For example, in Cleveland, $35 per month per unit for water is considered 'normal'. You can get some of this information of the HUD web site where they calculate the reduction in subsidy amount based on what the tenant pays directly vs. what the landlord pays.

Assuming there is a panel in each unit, separately metering that may be possible but again, would not be cheap to set up.

With respect to individually metering of all utilities, it is obviously much preferable, but not always pragmatic. I recently saw 50 unit building where HW was supplied by the building. In speaking to the maintenance person, I asked if it would be possible to meter separately. Turns out that without doing major plumbing restructuring, the simple answer was a big NO. The HW plumbing is a spider web going through concrete slabs. There is not even a riser with a shut off for each floor. IF I was interested in that property, I would just have to build it in to my expenses and probably look at putting in the most efficient HW heating I could find / afford.

Generally this kind of work is best done when the property is totally or mostly vacant as it requires opening up walls.

Hope this helps.

Oren

I would ask for actuals from the past 12 months (in the hopes of getting them for 1 month).

The estimates provided equate to $50 electric, $50 water, $45 gas, so $145/mo/unit.  This could be reasonable depending on the type of heat/AC and other fixtures.  I wouldn't rely on an estimate from a broker though, you should either figure out your own estimate by calling the local utilities or get actuals from the current owner.  Estimates are rarely on the conservative side, especially when coming from somebody trying to sell (broker or seller).

Separately metering would be a pretty large cost.  Might help to have more info on the property, purchase price, rents, etc.

Medium logoMichael Seeker MBA, Renting502 | http://www.Renting502.com | Podcast Guest on Show #94

Bill,

You should google something called a RUBS system. There are companies out there that will do this for you. They prorate the utilities based on square footage, tenants, bathrooms etc. You will be pleasantly surprised by it I think. You can also message me about it...I have looked into for one of my properties.

Jim Horton, Terrace Consulting LLC | [email protected]

Originally posted by @Jim Horton :

Bill,

You should google something called a RUBS system. There are companies out there that will do this for you. They prorate the utilities based on square footage, tenants, bathrooms etc. You will be pleasantly surprised by it I think. You can also message me about it...I have looked into for one of my properties.

Jim - Great info!  I heard about this a while back but could not remember what is was.  That is definitely a great option for my situation.  I just need to make sure it is an OK option for Indiana.  Thanks.

Medium olddawgslogoBill Manassero, Old Dawg's REI Network | [email protected] | 9493921999 | http://olddawgsreinetwork.com | Podcast Guest on Show #173

you can contact the companies and they can tell you.....or Google whaat city it is in and RUBs and it should take you to information......I did it in chatttanooga

Jim Horton, Terrace Consulting LLC | [email protected]