converting to individual water meters

Multi-Family and Apartment Investing
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converting to individual water meters

M Parsa
El Paso, TX · Member since 2012 · 3 posts · 2 votes

I own a property with two duplexes and a house that are all on the same water meter. I spoke to the utility company and they said to split it up and put an individual meter on each unit would cost at most $8000. I am paying $250/month in water and would like to have the next tenants cover all the utilities not just gas/electric. I plan to hold this property for the long term. Do you think it would be a good move to install the individual meters?

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Robert AdamsBusiness Member
Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
13y

Why not just charge each tenant a flat water bill per month (ex. $50 per unit in the duplexes and $75 for the house) and save the $8k. Therefore passing majority (if not all) of the water bill onto the tenants without having the $8k expense.

In the example above you would receive $275 mo. Save the extra $25 as reserves for higher months (ex. leaks, accidental floods, etc.).

Or instead of adding this extra bill just add that amount to the rent and continue to say it is included in rent.

Either way you are keeping the $8k in your pocket.

Good luck with your investment property.

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  • Huggy Baird
    Lakewood, OH · Member since 2013 · 68 posts · 23 votes
    13y

    If you put in $8k and received $250 extra cash flow per month that is a 37.5% return on your investment. Amazing deal

    Of course, you may not be able to pass all the cost on to your tennants. In other words the market will likely offer less gross rent for a unit with fewer utilities provided. You'll have to know your local market and estimate the effect of the decision on rent.

    Good luck

    3Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    How long are you planning on holding this property in years??

    It will take about 3 years to recoup the cost or more.

    The BIG question for your area is do other landlord include utilities (water)?? If so then even putting new meters in the tenants will jump ship to another property unless you lower rent or they cannot qualify elsewhere.

    If you just have an old building for the area and other landlords have already converted awhile ago to separate meters then you should be fine. When tenants do not pay they use 30 to 35% more water and do not report water leaks as often and let all their buddies was the cars outside and wash their clothes inside and take showers at their place etc.

    I do not like apartments anymore where I pay the water unless I am buying for almost nothing and factor in 65% annual costs and still cash flow great.

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  • Marc Bodinger
    New York City, NY · Member since 2012 · 253 posts · 7 votes
    13y

    I agree with Joel Owens in that you need to figure out how long you are going to own this property. A cost of $8000 seems like a lot but if you plan on being the landlord for the foreseeable future its not so bad especially if it makes your place more modern. Do other buildings in your area charge their tenants for water?

    1Reply
  • Craig E.
    Investor · Sacramento, CA · Member since 2011 · 87 posts · 56 votes
    13y

    I install in-line sub meters for a fraction of the cost (depending on service diameter) and bill back. Is the AR burden the reason you are considering going through the muni?

    1Reply
  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    13y

    Why not just charge each tenant a flat water bill per month (ex. $50 per unit in the duplexes and $75 for the house) and save the $8k. Therefore passing majority (if not all) of the water bill onto the tenants without having the $8k expense.

    In the example above you would receive $275 mo. Save the extra $25 as reserves for higher months (ex. leaks, accidental floods, etc.).

    Or instead of adding this extra bill just add that amount to the rent and continue to say it is included in rent.

    Either way you are keeping the $8k in your pocket.

    Good luck with your investment property.

    [email protected]702-349-9175
    The Adams Team at Rothwell Gornt Companies4.970 Reviews
    WebsiteView Page
    7Reply
  • David NilesBusiness Member
    Property Manager · DeLand FL · Member since 2012 · 860 posts · 243 votes
    13y

    I'm with Robert Adams on this, find a flat rate that covers most of the bill and go with it.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    The problem with that is trying to collect the water on the tenants or the tenants saying since the meter is not from the water department they do not believe it is accurate. Also if you get one reading and split the cost the tenants will say one is using way more water then they are and they will not agree to split equally.

    One of my friends owns a 150 unit that is not separate metered from the county but using an outside company. He bills the tenants and uses a collection company against them. Some will pay on time and about 30% will pay late and others will not pay and go to collections. It's part of the type of tenant you are dealing with an area. As long as when you buy a property you go into it knowing these types of things and buy low enough you are okay.

    It's when people that do not have experience overpay not knowing these things and trying to fix the problem after words that severely affect cash flow and to be able to sell for a profit down the road.

    Make sure the water company cannot lien the property even with a separate meter if the tenant doesn't pay their bill and leaves. Some states, counties, cities have weird water collection laws on the books which is why you have to investigate all of these types of things before buying.

    If you know the area is separately metered and tenants are used to it then I would pay for the separate meters and go that route. The other way can turn into a big mess.

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  • M Parsa
    OP
    El Paso, TX · Member since 2012 · 3 posts · 2 votes
    13y

    This is all excellent advice, I thought you had to have the utility company do something like this, but perhaps not. I will look into whether a plumbing contractor could do it for less. Probably they will be able to. I plan to keep the property a long time, at least 20 years, so I think I will try to find some way to get it done. I know I could raise the rent, but I think tenants look at the actual rent cost more so than utility costs, so raising the rent would probably make it harder to rent. The area itself is very mixed use, I think that tenants would be willing to pay water (like they already do for the other utilities). But I would only do this with new tenants not the current ones.

    0Reply
  • Serge S.
    Rental Property Investor · Scottsdale, AZ · Member since 2010 · 390 posts · 599 votes
    13y

    I have a 32 unit and used a local sub metering company. They installed all the submeters for free and bill the tenant $5.95 for the equipment rental and another $5.95 for reading the meters. When tenants pay they net the fees and remit to the owner. Owner continues paying the water co. There were a lot of catches in the contract that charged me for turn offs, bad debt etc. I was able negotiate the deal where my onsite maintenance man did the reads and the bad debt fees were dropped. I debated a long time if it would be worth it concerned that the tenant class would not pay and I'd have a higher turnover rate. Just did it in November and have not seen much in the way of data yet so the verdict is still out. I personally would not pay the $8k to the city if I could avoid it although this should add the value to the property.

    1Reply
  • Deborah BurianPro Member
    Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
    13y

    Serge S., was just searching on this topic and wondering how your change in metering worked...

    0Reply
  • Serge S.
    Rental Property Investor · Scottsdale, AZ · Member since 2010 · 390 posts · 599 votes
    13y

    Deborah B. I would say the verdict is still out. I'm over 6 months in and even with my negotiated deal I have not been able to offset water expense. The submetering company is not doing very well collecting and the fees for the equipment rental and read fees eat away at the income that actually is coming in. IF had 100% collections the water expense offset would be close to 75% and for me that would be additional income of around $1k per month. Unfortunately the best check received to date has been $100.

    1Reply
  • Deborah BurianPro Member
    Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
    13y

    Serge S. That's interesting and I'm sure a disappointment for you. I'm looking at a grouping of properties with about a 6K annual water bill. Willing to spend some cash to make that go away...

    0Reply
  • Robert AdamsBusiness Member
    Real Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
    12y

    Thanks for the "vote"!


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    0Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    I have thought about the cost/benefit of this, but have 1 big water heater for 4 units right now. The cost really isn't that much ($1500-2K/yr) if you then subtract the lower rent or higher vacancy you'll get without including utilities, some tenants who don't pay their bill, and you having to pick it up in the future (or in some areas, you then have to keep the bill in your name - not the tenant's - in the future), and the costs of getting it installed, separating pipes, paying city fees, (and getting 4 water heaters & space in my case), just didn't make sense..

    0Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    I forgot to add that I have gross rents at almost $60k/yr on my 4plex, so the utility expense doesn't eat into the cash flow as much as some of the lower-rent areas..

    0Reply
  • Yuliany W.
    Investor · Bay Area, CA · Member since 2011 · 92 posts · 69 votes
    12y

    Hi,

    I was just listening to the BP podcast 060, where and Brandon interviewed @Serge S.After listening to them, I'm thinking to submeter my rentals in Phoenix and Scottsdale, AZ. I called a couple of local submetering companies and got similar quotes as Serge, $5.75 for equipment rental and $5.75 for reading and collection. (I was not aware that we can negotiate the reading fee but I will definitely try)

    They went to assessed the properties, and told me that all the units already have individual shut off valve and this allows them (the submetering company) to stop service in the case of non payment.

    I haven't raised my rents in a while, I was thinking having the tenants responsible for their water usage is better than raising the rents, since I can not control their water usage. Also, when they are paying for their own consumption they will probably be more conscious.

    I was also considering to charge a flat fee for water, but that will not stop them from being wasteful.

    My questions are:

    - Will I be risking losing my long term tenants if I started to have them pay for water?

    - If the submetering company stop the water in the case of non payment, how do tenants have bad debt? (in @Serge's case)

    Thanks

    2Reply
  • Aaron R.
    Investor · Phoenix, AZ · Member since 2012 · 108 posts · 49 votes
    12y

    @Yuliany W. We added water meters in our Mobile Home Park in Tucson. It was the first thing we did. We were worried that the tenants would not receive it well. There were some complaints to the manager but overall the transition went smooth. Also, the MHP everybody is on a month to month lease so we just had to give a 90 day notice.

    As far as charging the tenants, if you charge a flat fee then you might as well not do the meters. If you go with the meters the submetering company should be able to help you with how to bill properly. I'm pretty sure there are some laws that have to be followed for charging based on meter reading. Once we submetered we started charging a minimum Sewer and Water fee of ~$9 each. Usage is then calculated on top of that based on the actual utility rates.

    0Reply
  • John Vashon
    Real Estate Investor · Concord, CA · Member since 2013 · 55 posts · 19 votes
    12y

    In California it is illegal to profit from selling utilities. Matching rates charged by the local utility will provide some protection. In Nebraska, reselling water could get you classified as a small water system and trigger testing an certification requirements. Talk with others in your area who have sub-metered and follow the law.

    2Reply
  • Darren Flater
    Real Estate Agent · Cedar Falls, IA · Member since 2009 · 38 posts · 17 votes
    12y

    I rehabbed a 4-plex three years ago. Someone told me that I could sub meter that for $8,000 and I thought that sounded like a waste of money. I tell you what i spent 4 grand on a toilet leak... Uh hum...... I would pay the 8 grand all day if I could go back. It sounds like the guys who have the rented meters still pay the bill and get reimbursed. In my area if a tenant doesn't pay there bill it doesn't come back on the owner.

    0Reply
  • Bryce Y.
    Dallas, TX · Member since 2011 · 308 posts · 59 votes
    12y
    Originally posted by @John Vashon:
    In California it is illegal to profit from selling utilities. Matching rates charged by the local utility will provide some protection. In Nebraska, reselling water could get you classified as a small water system and trigger testing an certification requirements. Talk with others in your area who have sub-metered and follow the law.

    I'm not 100% sure but I think in Texas you are also not allowed to profit from utilities. An extreme example is say an apartment that rents for $600 with water included vs $500 with $100 flat monthly rate. They are the same thing, but I think the later situation could open you up to some legal issues. Imagine standing in front of a judge and trying to justify a $100 water bill...

    (No legal advice)

    0Reply
  • Alan DeRossett
    Investor · Thousand Oaks, CA · Member since 2017 · 302 posts · 123 votes
    9y

    Anyone using Smart Meters that send the meter data over MQTT so tenants can read from Smart Home management or Smart phone Apps ? SoCal Edison has installed these types of meters and I need to create  Green Button software system to allow Tenants and me to read meters, motivation is to create a Sustainable living apartment building since rents are $50 to $200 per month more if i add Smart Services. I see the added benefit to security and knowing before the phone rings of leaks etc, to be worth any extra set up costs as We can mange twice the number of units once a smart management system is set up.

    0Reply
  • David Lilley
    Rental Property Investor · Dallas, TX · Member since 2016 · 261 posts · 170 votes
    9y

    Assuming your rental is in Texas, Allocated Utility Service is your best bet. Everything you need to know is here:

    https://www.puc.texas.gov/consumer/facts/factsheet...

    This thread is another good resource for conserving water and therefore reducing your bill until you can get all units through the transition. 

    https://www.biggerpockets.com/forums/432/topics/15...

    0Reply
  • Dash Siva
    Investor · San ramon, CA · Member since 2011 · 145 posts · 33 votes
    9y

    @Serge S. 

    I understand this post is a few years old, but was hoping to get your input on sub-metering after having more time to determine the cost/benefit at your multi-family property.

    Kind regards,

    0Reply
  • Cliff H.Pro Member
    Rental Property Investor · Nashua, NH · Member since 2014 · 587 posts · 477 votes
    9y
    Originally posted by @Alan DeRossett:

    Anyone using Smart Meters that send the meter data over MQTT so tenants can read from Smart Home management or Smart phone Apps ? SoCal Edison has installed these types of meters and I need to create  Green Button software system to allow Tenants and me to read meters, motivation is to create a Sustainable living apartment building since rents are $50 to $200 per month more if i add Smart Services. I see the added benefit to security and knowing before the phone rings of leaks etc, to be worth any extra set up costs as We can mange twice the number of units once a smart management system is set up.

     Looking into this myself now Alan. Lots of options on the market now for remote monitoring and tracking, though not sure how accurate they are versus traditional sub metering. Here are some companies I found across both water and electrical monitoring: 

    1. https://ecoisme.com
    2. http://neur.io/iem
    3. http://www.smappee.com
    4. http://www.ekmmetering.com (traditional submetering)
    2Reply
  • Alan DeRossett
    Investor · Thousand Oaks, CA · Member since 2017 · 302 posts · 123 votes
    9y

    Thanks Cliff for these links , forgot to mention this is on a owned 4plex with $60k per year income so adding some improvements like Smart home energy monitoring and sustainable energy devices that will allow me to increase rents by 10% since we can show Tenants a 30% savings to them on utilities. last year did double pane windows that lowered tenants bills and reduced most outside noise. Just finished our Smart Water Heater install and its reduced my Gas bill from $115 to $75 in the first month. 

    1Reply
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