Need help getting 4-plex to cash flow

5 Replies

Here's the situation: I bought a 4-plex in a B class area in June 2015 (about 7 months ago).  I'll be honest; didn't know about BP at the time, I had read a few books, but definitely didn't know how to analyze a deal the way I do now.

Bottom line is, it cash flows but not enough.  I do think there's a few things I can do to turn this mediocre deal into a good deal, however.  Based on market research, rents can be increased about 10-15% (no problem there; I have a plan in place with my PM to increase over the next 12 months).  Also, based on market research, many rentals in the area have tenant paid utilities.  For this property, currently water, sewer and trash are owner-paid.

So, here's my question: how can I convert water, sewer and trash over to tenant paid as efficiently (and fairly) as possible?

I've looked into RUBS/sub-metering companies, as my preference would be to have a 3rd party handle the billing for utilities (I heard about this on a BP podcast, and it sounded awesome).  The problem I've run into is the few RUBS/sub-metering companies I've found will not deal with a small operation like me.  Anybody have any companies they would recommend?

Kyle M.

You can always sub-meter the water yourself (I'm assuming that the units are all already completely separated).  If you want to improve your cashflow another 10%+ you should self manage.  Your PM is making money on your back no matter what ... and if you don't account for that in the process of buying the property, it's easier to end up in this situation than you may think.

Originally posted by @Jeremy Pace :

@Kyle McCorkel

You can always sub-meter the water yourself (I'm assuming that the units are all already completely separated).  If you want to improve your cashflow another 10%+ you should self manage.  Your PM is making money on your back no matter what ... and if you don't account for that in the process of buying the property, it's easier to end up in this situation than you may think.

 Thanks for the input.  I should have put this in the original post - self managing is not an option I want to consider for this property.  I'm factoring in PM as a "sunk cost" to all deals and want to cash flow even after that cost.  I'm working a job that requires me to travel 70%-80% of the time and work 50-60 hours weeks, so at this point using a PM is necessary.

Kyle M.

Ok, noted!

Assuming that your units all already have separated water, you can still install submeters yourself, have your handyman/PM/whoever read them once a month, prep statements, and add a processing fee (this is essentially what sub-metering operations do).  Meters are relatively inexpensive to purchase, and really easy to install.  Your tenants paying for water will likely require that they sign new leases, or at least an addendum.  Maybe you can use their rent increase re-signing as an opportunity to get that switched too.

Originally posted by @Jeremy Pace :

@Kyle McCorkel

Ok, noted!

Assuming that your units all already have separated water, you can still install submeters yourself, have your handyman/PM/whoever read them once a month, prep statements, and add a processing fee (this is essentially what sub-metering operations do).  Meters are relatively inexpensive to purchase, and really easy to install.  Your tenants paying for water will likely require that they sign new leases, or at least an addendum.  Maybe you can use their rent increase re-signing as an opportunity to get that switched too.

 Makes sense.  That would cover the water.  Sewer and trash are fixed, so then I guess bill them a fixed monthly fee for sewer and trash as well?

Kyle M. you can do that, you can even bill them all together on one bill if you like, just itemize it so that they can see what's going to what.

The 'best' way to do it would be to have the water company come out and put an official water company meter in for each unit, but I don't think I have to tell you ... that won't really help your current cashflow concerns!  Amazingly, they won't do it for free, or even cheap.