Fort Smith, AR · Member since 2017 · 15 posts · 1 vote
Obviously, the goal of owning buy and hold real estate is to maximize cashflow and NOI. I have a 41 Unit Apartment Complex that I'm analyzing that has great potential but it has one issue, the WATER BILL. The water bill runs about $2,000 monthly and $24,000 annually. That equates to 13% of our monthly cashflow being eaten up by just water.
My market of Fort Smith, Arkansas (also known as the River Valley) is pretty consistent with owner's being responsible for paying water. It seems to be the biggest burden for Apartment owners in my market, and the city is continuing to raise the water bills every few years.
My question to you guys is, should I explore RUBS/submetering although everyone in my market is getting destroyed by their monthly water bills? Who in the BP community has implemented this strategy? What was your experience?
@Joshua Harmon and when you implement RUBS for water you'll save on your sewer bill since tenants (studies show) will be more conservative with their water usage once they are paying for it. Sewer bill is usually based on water usage. So you'll get a 2 for 1 savings.
In my primary market the utility creep was pretty standard. So when I bought two MF properties close to each other I just changed the rules whenever a tenant vacated. New tenants pay what they use (cable, water, electric). I had about 6-10 people sitting in the parking lot waiting to look at the recently renovated apartment. None of them even blinked about the utility issue. Saves me approx $100/month per door.
@Kurt Jones are RUBS typical in your market? I own 55 units in Ft Smith and my water bill is $2500/mo. I was considering RUBS but wasn't sure how to introduce it to the market. Any ideas? Also, do you structure it as part of the rent or how does that work? Is it a separate bill and if so how do you enforce payment of both rent and RUBS? Will a judge enforce payment of RUBS on an eviction if they pay rent but not RUBS?
Here in Searcy I love to pay utilities on my units. On my 1/1 apartments I charge an extra $150 a month for utilities paid option. Water always runs 43$ which is the minimum and electric rarely goes over $80 on the upstairs units and usually stays below $60 on downstairs units. I'm making a killing paying utilities. I've even thought of getting rid of the separate water meters to bring my bill down, right now I pay a minimum for each unit, I would save about $250 a month on a single meter.
@Joshua Harmon and when you implement RUBS for water you'll save on your sewer bill since tenants (studies show) will be more conservative with their water usage once they are paying for it. Sewer bill is usually based on water usage. So you'll get a 2 for 1 savings.
@Joshua Harmon and when you implement RUBS for water you'll save on your sewer bill since tenants (studies show) will be more conservative with their water usage once they are paying for it. Sewer bill is usually based on water usage. So you'll get a 2 for 1 savings.
Here in Searcy I love to pay utilities on my units. On my 1/1 apartments I charge an extra $150 a month for utilities paid option. Water always runs 43$ which is the minimum and electric rarely goes over $80 on the upstairs units and usually stays below $60 on downstairs units. I'm making a killing paying utilities. I've even thought of getting rid of the separate water meters to bring my bill down, right now I pay a minimum for each unit, I would save about $250 a month on a single meter.
Sounds like you have a nice system going for you. I will explore this option as well since the rents are about $75 under market rents.
In my primary market the utility creep was pretty standard. So when I bought two MF properties close to each other I just changed the rules whenever a tenant vacated. New tenants pay what they use (cable, water, electric). I had about 6-10 people sitting in the parking lot waiting to look at the recently renovated apartment. None of them even blinked about the utility issue. Saves me approx $100/month per door.
Hate to be a party-pooper, but in some jurisdictions it's illegal to profit from charging your tenants for utilities, so tread with care if you implement a system in which you pay less to the utilities than you charge your tenants.
Check with your PM or your lawyer, etc.
Of course if you're just billing back to the tenants what you pay, there's nothing wrong with that, and as other have already said, it's a pretty fair and efficient system so long as the market will bare it.
I do building automation/systems integration for a living, and i installed a system in a mall in colorado a few years ago where we monitored the BTU's consumed by each individual tenant from their shared hot water and chilled water systems and billed them all out individually. I wonder if something like that would be worthwhile as well, allowing you to distribute the costs of heating the the tenants as well.
@Ryan Tuleja@Joshua Harmon actually RUBS is what you do instead of submetering. You still only have one meter and you use a system/formula to determine each tenants portion of the bill.
I think it’s called Ratio Utility Billing System. Basically you are using a formula based on sqft, number of occupants, number of fixtures, number of bedrooms, or a combination of these to calculate how to divide the utilities between the different tenants/apartments. It’s like when you had roommates in college and everyone divided the utilities and rent.
I use RUBS water billing for ALL of my Properties. Been doing it for over 10 years! (Best move I ever made!) I thought ALL Landlords did this? It's a no-brainer...