Hello Fellow investors

I am going through getting the 3 family rehabbed in Springfield MA. The goal is to have it as a long term buy and hold cash flow property. It is in a class C neighborhood.

There is major plumbing work that needs to get done. I am replacing all supply lines with pex. I will be running separate lines to each unit. So I have the opportunity to add sub-meters for each unit for the cost of the meter itself.  I would like to offset the cost of water to the tenants. Currently, I do not have plans to offer them washer/dryer/dishwasher hookups. If I sub meter the water, I can offer that option. That might attract better tenants. I also heard of horror stories of thousands of dollars of water bills because tenants are retaliating and they flood the house.

I know the rules: You need to have licensed plumber sign off that low consumption faucets, showers and toilets have been installed. This is not an issue for me.

My property manager is very concerned about sub metering. He is saying nobody does sub metering except the new constructions and if a town inspector comes in and has to sign off on it they will require that we have fire sprinklers to be installed since it is a 3 family. He is also saying that there are a lot of rules and regulations around it that I don't know of and it will cost lot more than I think. The only thing he has to do in my mind is read the meter every 3 months and bill the tenants. I don't think it should be that difficult.

My question to the community is: Does anyone have experience with sub metering water for an old triple-decker in Massachusetts? What are the pitfalls? What are the hidden costs? Would you recommend it knowing that I could get it done easily since I am redoing all the plumbing.

Thanks

I don't think sub metering would trigger inspectors to want sprinklers but other work.  If it is a major rehab they could trigger you to do so but doesn't happen often if you are upfront about your plans. 

Call the city water department to potentially save yourself from racking your brain over cost breakeven analysis. I attempted to do it in ct (yes I know your question is about mass) and they said that they don't add meters. Some places you can pay for it and some don't let you. Good Luck!

Originally posted by @Jon Bachman :

Call the city water department to potentially save yourself from racking your brain over cost breakeven analysis. I attempted to do it in ct (yes I know your question is about mass) and they said that they don't add meters. Some places you can pay for it and some don't let you. Good Luck!

 I think that depends on location and the water distribution company Jon. I was just at a 6 plex in Vernon CT that had 6 separate water meters. Maybe it is a recent change in policy that they no longer add meters?

Originally posted by @James Denon :

Hello Fellow investors

I am going through getting the 3 family rehabbed in Springfield MA. The goal is to have it as a long term buy and hold cash flow property. It is in a class C neighborhood.

There is major plumbing work that needs to get done. I am replacing all supply lines with pex. I will be running separate lines to each unit. So I have the opportunity to add sub-meters for each unit for the cost of the meter itself.  I would like to offset the cost of water to the tenants. Currently, I do not have plans to offer them washer/dryer/dishwasher hookups. If I sub meter the water, I can offer that option. That might attract better tenants. I also heard of horror stories of thousands of dollars of water bills because tenants are retaliating and they flood the house.

I know the rules: You need to have licensed plumber sign off that low consumption faucets, showers and toilets have been installed. This is not an issue for me.

My property manager is very concerned about sub metering. He is saying nobody does sub metering except the new constructions and if a town inspector comes in and has to sign off on it they will require that we have fire sprinklers to be installed since it is a 3 family. He is also saying that there are a lot of rules and regulations around it that I don't know of and it will cost lot more than I think. The only thing he has to do in my mind is read the meter every 3 months and bill the tenants. I don't think it should be that difficult.

My question to the community is: Does anyone have experience with sub metering water for an old triple-decker in Massachusetts? What are the pitfalls? What are the hidden costs? Would you recommend it knowing that I could get it done easily since I am redoing all the plumbing.

Thanks

I am not an attorney, but if you do some poking around online it appears that beginning in 1990 buildings in Massachusetts with 4 units or more that are undergoing significant renovations are required to have sprinkler systems installed. I couldn't find anything on buildings with 3 or less units. 

That being said, you mentioned this is a class C neighborhood. What are your plans for getting the tenants to pay a $3-400 water bill every quarter? Class Cs can be hard enough to pay a consistent bill, let alone one that they don't "plan" for, even though they know it is coming. 

You could potentially be shooting yourself in the foot here. You will likely have to decrease the rent (to accommodate the fact that you are now billing them for water) while increasing the odds that the water bill doesn't get paid by them, which means you would have to pay it (so now you are out of $ twice). 

I dunno James. You might want to reconsider this one given the area. 

I believe water sub metering is illegal in ma. Won't cost you any extra to run the lines all separate in case the laws change. Also easier to shut down one apartment for work vs all 3.

I think Filipe has a good point. What happens if they don't pay? Does just that unit get shut off? 

The tenant is most likely not going to be used to paying the water bill and may not have it saved up quarterly. Especially in that type of area. Is there a way to bill it monthly, even an estimate, and you collect it?

Maybe you could have it plumbed that way now but not do it and in a few years if the area changes go to that type of billing.

As for laundry why not put a paid one in the basement if you want to offer that service rather then in the unit.

@Thomas Hickey It is allowed but there is a lot of legal stipulations. i have not heard anyone apply it successfully other than one video recording I saw from Masslandlords website. 

https://malegislature.gov/Laws/GeneralLaws/PartII/...

@Filipe Pereira Fair point but I have heard horror stories as well. I would like to use the meters as a stick to prevent any abusive behavior from tenants. Maybe I do need to bill them monthly like @Douglas Snook suggested rather than springing a quarterly bill on them. See below for the horror story:

https://www.biggerpockets.com/forums/52/topics/430...

By the way, once I get more liquidity, we have to touch base again for your offerings :)

Since nobody else chimed in I am assuming this is not too popular.

Originally posted by :

@Filipe Pereira Fair point but I have heard horror stories as well. I would like to use the meters as a stick to prevent any abusive behavior from tenants. Maybe I do need to bill them monthly like @Douglas Snook suggested rather than springing a quarterly bill on them. See below for the horror story:

I just read that entire post, and not to "victim blame" by any means, but there were SO MANY things done wrong/poorly in that situation... that being said, I've also heard of tenants pouring concrete down the drains. I'd be willing to bet that replacing the drains costs a lot more than a year's worth of water bills...point being that if there is a will to trash your place and make your life a living he**, then just leave it up to a horrible tenant to find a way!. 

@James Denon We work with a successful investor out of Haverhill that has all of his buildings submetered. He has billed out for over 150k of water over the years....enough to buy a nice car or two. 

 After seeing his success with it we have started to sub-meter all of our buildings as well. 

Couple things to note. He bills on a monthly basis so tenants aren't faced with a large bill each quarter. That means your property manager will have to go out and read the meters and then send invoices. Confirm what they will charge for this (hopefully, its included in your fee). Also, this enables you to send 7-day notices for non-payment of the utility. So its easier to evict people if you need to for non-payment. 

I wouldn't worry about the inspection for plumbing. Its pretty straightforward and makes sense if you're redoing all of the plumbing now. Seems like a no-brainer to me. 

Happy to answer any other questions on it. 

@Rob L. Excellent information. Thanks. Glad to hear someone in MA executes this successfully.

I think that might be the primary reason for my property manager's hesitation. It is more work for him. I am ok with him charging his % management fee over collection of water bill just like the rent. The workers he sends to do the mowing and cleanup are probably not numbers savvy to write a bill. We can come up with a system.

Does your investor friend receive his bill on a quarterly basis and send out the bills on a monthly basis? So does that mean he sends the bill to the tenants before he receives his bill from the city at the end of the quarter? I thought you had to pay the bill first to the city and bill the tenants based on what you already paid the city.

As long as I have a licensed plumber complete the task and sign off on it, I don't think I have to call the inspector over to be able to bill the tenants. Would you agree?

Thanks so much for the useful info.

Sorry @James Denon   for the late response. I'm up in NH on vaca. So we read the main house meter and all of the individual meters and calculate the usage. Each city when they send you the bill includes the cost of water and sewerage. We use that cost per unit in calculating the bill for the tenants and we include all of that information in the bill. The law outlines all of the specific information you must include in the bill. 

He sends out bills on a monthly basis. One thing to note about the licensed plumber. You need to have them fill out this form, 

http://www.mass.gov/eohhs/docs/dph/environmental/s...

Once it's signed you need to have it filed with the city board of health. Depending on the city you may come across some confused people when you try to give them this form. We had one city hall pass us along to 3 or 4 different people/departments before someone knew what the form was and what to do with it. Other cities deal with it all the time and are familiar with water submetering. It's also a good practice to include a copy of this form with your lease just like you would a lead cert if you have it. 

Lastly, remember to remind your PM that you should send 7-day notices for non-payment of utilities on this if people are late. 

@Rob L. thank you so much for the valuable information.

Hope you had a good vacation.

All water lines are seperated. Next week the submeters will be installed and we will see how it will work.

I like the 7 notice rather than the 14 day. 

I know i'm resurrecting an old thread here. But I'm a landlord in middlesex county I have a 16 unit res (1 br units) my last quarterly was 12k. It's time. I'm wondering if anyone that's been through this in MA may be willing to talk me through the ins and outs? I'm aware of all the state regs but I've had a plumber tell me it "can't be done". Thanks!