Water Meter - Change from Master Meter to Individual Meter

[Mike Russ]

Hi - I’m working on a deal in Dayton,OH and the water situation will make or break the deal. Currently the Landlord pays for approximately $315 per month for water/sewer charges. He has really low rents and does not pass the charges on to tenants. As an investor this makes the deal a challenge.

Looking for recommendations/advice on how to proceed.

1 - Negotiate water meter install into deal. Generally, what are the requirements to install individual water meters in an apartment. The current Meter is at the street but all of the services, including main disconnect come into the closet of one of the units. I think we could have meters installed here but it would be tight and I’m not sure of code restrictions.

2. Don’t install individual meters and charge a water/sewer fee to each tenant. This will likely be hard for the existing tenants to understand since the current LL is paying this for them and not passing it along.

3. Don’t install water meters and raise rents up to reflect the purchase price and me paying the high water/sewer. I will lose tenants but long term this is a property l like.

Any other approaches or advice?

The LL rejected my initial offers based on operations as of today. This water situation is the deal killer that I need to resolve.

Thanks,

Mike

[Taylor L.]

Individual metering can be exceptionally expensive. If it's a low $ value deal it's unlikely you'll be able to negotiate enough into the deal to cover the work.

A flat water/sewer fee may be acceptable in your market. Some areas have regs against it, you'll want to look into that. Depending on the size of the building you can do RUBS. That doesn't work in every market though either.

Either way, you're likely to lose some tenants, but that's kind of the point. You want to run the property better than the current guy is running it. Part of that means better quality tenants.

We're going through this on our most recent acquisition. Occupancy drops, but it's temporary. We're bringing in newer, better qualified tenants as we turn the property around.