Your Opinion on Closing Laundry Room & Billing for Water

18 Replies

I am about to close on a newer 6 family. It is fully rented, but was not managed well either financially (less than 1 month security, very high water/laundry bills, etc.) or contract-wise (simple 1-page contract). Once I close, this is my plan, in rapid succession.

Water bill is $300-$350/month to landlord, and checking with water utility indicated it should be closer to $150/month.

1) Bring out Water Company Rep to ensure main water feeed not leaking.

2) Close Laundry Room - Basically a shed in backyard with space heater, 3 free washers & 3 free dryers. Tenants leave doors open and I am convinced neighboring MHFs come in to do their laundry. Costs: $50/month for a tenant to "keep clean" + $100/month electric/heat + likely $150 for water. Total costs likely $300 out of $2100 total max rent.

3) If leak check and closing laundry room still leaves high water bill, implement RUBS to bill tenants for water (RUBS is an estimated bill to each unit by and independent company). I may/may not give tenants 30 days to get out of their contract before implementing

NOTE: I will have no problem getting more tenants at market rates.

ANY THOUGHTS TO THIS PLAN? I am willing to take a short term hit to rent to bring this building up to profitability. Seller is out of area, and also spent $300/month to a manager.

I have 3 coin op machines that actually makes a little money over the water heating/air bills.

Be careful about charging for any utility as you could become a utility company under state and federal laws. And if you fail to provide a utility it can get sticky. I'm sure there are differences state to state.

I know of this issue because of a shared water well where one was paying another and the well went out and wasn't reparied in a timely manner. Take care and investigate issues in your area.

As the security is not so good (a mostly unlocked shed in back yard), I pondered coin op but am not convinced it would ever dent the high costs much and I also live 60 miles away, so could not collect coins more than monthly in reality. And it makes a tempting target sitting outside, as I said.

Well, I'd try a better door and lock first, a comination lock, give the numbers to the tenant and tell them if it is abused you'll remove it. Let them know the water bill is sky high and that you're checking it out.

Possible, however not sure if I want to buy a handful of coin op laundry machines and then mothball them...

Ken, the only issue is that the current tenant has a washer/dryer to use that they will see as part of the deal for rents. You don't need coin-op jobs, I just meant to secure it and let them know if it's abused you'll shut it down. That should keep them in a position to care for the machines, IMO. Most people won't rent some place that has no utility for a washer/dryer or laundry services on site.....most people want to wash their clothes at home.

I don't know what your tenets lease says, but if I were one of them and you attempted to alter that lease before renewal time, I would be pretty upset. Especially over the RUBS idea. Upset enough to file a lawsuit if I felt it was a violation of the lease contract.

Yes, the washer and dryer are probably an implied part of the lease, since they were available when the lease was signed. One thing you could do is specifically exclude them on each renewal, and then close-up shop once everybody is excluded.

With the RUBS, you can install whatever equipment is required right away, but then only write it into the lease when it comes up for renewal.

You can't just start charging for water in the middle of a lease just because you want to. And giving them an option to leave isn't a solution either. The lease includes water and binds you as much as them.

I did some more digging today. Some pertinent facts:

- the water company charges a minimum $58.50 per unit for meter - 2000 gallons water + $7/additional 1000 gallons. The common meter therefore spends $58.50 once and $7/1000 gallons therafter.

- Therefore RUBS and submetering are the only logical alternatives, not town meters at $1K each.

- The 6 units (8BR, 6BA) combined averaged 23,000 gallons of water per month the last 6 months and the total water bill has been $300-$400 a month.

In my experience coin op laundry is profitable. You can't use the water cost now to compare to potential coin revenue as the use will go down if it is coin op. (if a resources doesn't cost anything, it will be used more).

If you can't separate the actual water use, then I wouldn't bill for water. It is not legal in my state unless you separate it, but even if it was, I wouldn't, too much potential for conflict.

You should also be checking toilets etc for leaks. A small drop from the tank to the bowl every 30 seconds is barely detectible but can double water usage, in my experience.

If no one is home, does the water meter still spin?

Is there anyway to put machines in the basement or in the apartments?

@Paul

There is no basement nor extra room/storage areas, and I do not plan to put washer / dryers in 6 units. As they are all electric units (not gas), I don't have 220V service, in addition to the fact that washer/dryer can occasionally flood (4 units are on 2nd floor) as well as cost & moisture issues.

I considered nad dropped the idea of coin op laundry given the buildings small size (6 units) and the fact that the outdoor "laundry shed" is not very secure and tenants constantly leave the shed door open and the coinboxes could be targeted, as well as I already have problems keeping neighbors from using it, etc.

I am going to have the water company come out after closing, tell everyone to stop using water and they will check to see if the meter still spins - toilet leaks and faucet drips come to mind (I also wonder about possible main line water break, I had that happen twice in my life).

Wouldn't the main line be on the city side of the meter?

I'm not sure why the small size would make coin op not ideal, but I understand the security concerns. I have coin op for a 3 unit building. It works out well. I buy the machines myself, I don't use a service.

If machines are in the units, I like to have a floor drain.

Where will the tenants do their laundry if you remove the machines? How far away is the laundrymat?

The town responsibility for water ends at the curb. The line to the house is my problem.

There are several laundromats in the town.

We used to be in the washer/dryer buisness in our mobile home parks. The thing was not a money maker, it was more offered to be a service for the people. All it took was one occurence of teenagers hanging out in there and damaging things to close them both down. That tied with the liability aspect of it was enough to get out of that buisness.

I have looked at the state landlord - Tenant regulations applying to utilities.

-- If the landlord fails to supply essential services, the tenant shall give written notice to the landlord specifying the breach...

-- "Essential services" - utility services, including gas, heat, electricity, and any other obligations imposed upon the landlord which materially affect the health and safety of the tenant.

I do not think laundry room qualifies, so I am under the impression I may terminate it unless specifically promised in lease.

I think also this means supplying, not necessarily paying for it, again, unless promised in lease.

I agree that laundry is not an "essential service" but if a tenant claims they rented in your building because there was free on-site laundry they might try to get out of their lease. You said getting new tenants is not a problem, so unless it is an unwanted hassle to that's probably your best option.

You do away with the maintenance and upkeep of the machines, the utility expenses and if you're right about neighbors using the laundry reduce the traffic onto your property which can only be a good thing.

You are making this way too complicated. Put in a spring loaded steel door with a combo lock or keyed Auto lock. Meaning you will need a key to always open the door. I do this for all common areas in the properties I own.

Can you go investigate the meter while no one is home? Off hours? Just looking at the meter when no one is home will give you an indication of leaks. I try to do that once a year in mine. You'll be surprised with leaky faucets and toilets. They add up.

I would speak with the tenants. Most people are reasonable when approached properly. "I need you to help me, help you" kind of thing. Lay it out for them. If the property is not profitable, it cannot sustain tenants. To turn a profit you must address losses. The laundry situation is a looser in its current state. You lay out the options... New coin-ops in a secured building they must respect and help maintain, with an increase in rent to cover excess water usage as soon as legally allowable... or laundry goes bye-bye altogether, all their plumbing fixtures get inspected and repaired or relaced, and their rent goes up to cover water usage anyway, just not to include laundry. Third option is to move.
They will likely either move or agree to coin-ops. I would provide secure building and have a service install coin-ops, which they will maintain and insure. Even if you make no money, it will cover expenses and make for better rentability. Pay a tenant $50 to watch over it and keep in clean, which doesnt take much effort if it isnt left to get out of control.

Edited: thought Id clarify that by "replace", i was referring to replacing old toilets with newer low volume toilets. It appears you favor doing away with laundry, so this would show our willingness to make upgrades to property that improve quality while saving money and isnt just about your wallet.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here