Rental Property Investor · Houston, TX · Member since 2015 · 454 posts · 273 votes
How do you account for RUBS in your proforma underwriting if the property is all bills paid?
Does one reduce the current effective rent and then implement rubs? If so, by what measure? Reduce to market rent without bills paid?
What are some suggest processes\methods to remove all bills paid and implement RUBS? Should RUBS start on new leases and slowly phase out all bills paid when a lease expires\renews?
Can you implement RUBS within 3-4 months for the entire property?
I didn't implement RUBS yet, but also doing some research on it.
Note: that RUBS are common practice in some markets while other markets not so much. in not RUBS friendly market usually owners include/ add them to the rent.
In terms of underwriting, often water and Gas will be paid by the owners, while in most situations there are separate electric meters.
If i see a proforma or P&L where the utilities are paid by the seller and include in the rent i will always make my first offer based on actual numbers - the NOI will be lower if RUBS are not in place. OK, so this is the value-Add opportunity for the buyer.
I will run my "Re Positioned" proforma on market rent and then have the RUBS as credit part of the income column. so you pay for the utilities and then it comes back as credit.
I would think if you have tenants that you keep it would be wise to talk to them about it, communicate it and see how you go. for new tenants it would be much easier.
I know that @Gino Barbaro implemented RUBS few time so he is probably the best man to ask.