Installing Individual Meters on Properties

12 Replies

I am looking at properties and have found a few deals that I would be interested in if I were able to install separate metering on a duplex. I was wondering if anyone has had any experience with how much this may cost?

One of the biggest things that I've been finding that kills my numbers is it seems about half or so of the current Owners are paying atleast water/sewage (not passing it onto tenants) and in some cases all utilities. This seems to be due to not having metering separated on their properties. I am interested in seeing if it would be cost-effective to have meters installed so that we could pass these expenses onto the tenants...

Any advice would be greatly appreciated! Thank you very much!

@Brandyn Collins a lot of these items are incredibly market specific. For instance, in the Chicago suburbs where I work pretty much no one that I know is passing water costs on to the tenants. If I decided to spend the time and money sub metering, I would be doing something no one else in the market is doing. I would most likely get push back on this from potential tenants, and may have to lower rent (which defeats the purpose!). 

For gas and electrical meters, I have only had to install one new electric service/panel on my property in South Bend, IN. In that market I believe the cost was somewhere around $2200 to do this project. I probably over paid as I am out of state and ended up going with a very good/expensive company. One of my clients did this job locally in Berwyn, and it ran somewhere around $1500-2,000 per meter for the electrical. The gas was more dependent on how much re-piping had to be done, but it was also fairly expensive. 

I hope this helps! Make sure to research the local market before puling the trigger on any of these items. 

You should be able to get it priced out pretty easily in your area.  I had a duplex once with separate electrical, but shared water and sewer.  It wasn't overly complicated to ask the town for the average cost and just split it in two.  I would def make sure you pass the cost on to the tenants though.  

Separating and costs it depends on how the plumbing is done. It's true that water is getting very expensive, double what they were 10 years ago. It also depends on whether charging for it is a common practice in your area. If it's not, it'll make your property harder to rent. I have a SFR, where it's common for tenants to pay utilities, and I pay it and in turn bill them. For municipal utilities though, if the tenant doesn't pay, they charge it back to me and add it to my property taxes with fines and penalties. I found out the hard way, so I pay it, and bill the tenant.

I looked into it some years back for some triplexes I own where it's 3 stories, one apartment per floor. My plumbing was getting old, I constantly had to repair leaks, and I inquired about replacing the pipes. For a 3 story, there's a main pipe running up for the bathrooms for water. If they are each metered separately, I would have to run separate pipes up, one for each floor. Same for the kitchen. That was some 20 years ago, and just to replace all the plumbing was $25,000 for the whole building. But that's only half the story, the pipes for the bathrooms run behind tiled walls, if I rip the pipes out, I would have to rip out tiles, as also, move the toilets and bathtubs, in other words, 3 new bathrooms. You're not going to rip apart the tiles, and just patch he walls, right? Same for the kitchens, last renovation as I could cut into the living room walls.

What did it come out to? Depending on how fancy you do the bathrooms, that's another $25,000, for a total of $50,000. Back then, water for the 3-plex runs $100/month total, and to charge the tenant back $33.00 is hardly worth it. Nowadays, water run about $100/month per apartment, and even here, for $50K it's not worth it, particularly if I have no problems to begin with.

On the other hand, for a side by side duplex, the cost of re doing the plumbing may be minimal.

I looked into separating gas charges for a co-worker, who rents an apartment, and the landlord splits the monthly $30.00 cooking gas bill with him. As I said, it depends on how common it is, and charging tenants for gas is not common, and it really bothers him. He said he wanted to talk to his landlord about putting in a separate meter which I think is crazy. So I looked into it, and as it turned out, the way billing is done, there's a minimum charge for providing gas to a particular meter, comes to about $17.00/month, so between him and his landlord, gas use comes to $13.00/month, each consuming about $6.50/month gas. With the separate meters, each would pay the $17.00 plus the $6.50, so he'll be paying around $23.00 a month on the separate meters. This compares to the $15.00/month the landlord was billing back to him.

These are the issues I face with utilities. In the NYC area, landlords generally covers the utilities for multi-families, but for SFR's, it's the tenants.

I generally agree with the comments above. If you can charge back the tenants, great but that is extra time you have to take each month and bill. Then you have to figure out pro rata and pro rated amounts when tenants move out at weird times. If utilities are killing your deal, it may not be that great of a deal.

First and foremost thank you very much for all of your responses, they have helped me understand the additional costs that it would take to accomplish what I was asking.

@John Warren

Approximately 60% of Landlords in my area charge some form of utilities back onto the tenants, and approximately 20% charge all utilities back onto the tenants. We are currently looking at duplexes with 4br 2ba, and it seems that historical utilities combined for these if the owner pays are in the neighborhood of 300-400$ a month.

It definitely is a gamble in Northeast Ohio to take the time to install additional meters to pass on the fees to the tenant, but you are right that if it means I have to lower rents to compensate its a wash on income and a negative on the expense I accrued due to metering.

@Ben McMahon

That is what we are trying to do. We have some deals that would cash flow 150-200 per door in our area, but if we have to pay water and sewer in our area it costs near 200/mo because of a sewer revitalization fee that they added a few years ago that is about 100-150 per month fee (that has nothing to do with the amount you are using the sewer). This was due to the cities having to replace very old piping and a ton of EPA fines they accrued before they actually fixed it, and they just passed the bill onto home owners.

@Frank Chin

Thinking on what you've said it may just be more beneficial to possibly increase rents comparable with what the utilities would average out to be and not take on the considerable cost of dealing with the piping.

To be honest when I first asked the question I did not even consider the fact that it would be likely to have to repipe entire portions of the home. I greatly appreciate your insight and experience in this as I think it will help me avoid spending even more time looking into it to find that it isn't a worthwhile endeavor.

@Peter M.

As much as I don't want to accept that you're right, I know that you're right. We are fairly new at this so we are trying to figure out our numbers and find deals where we get 150-200/door, but if we have to take on utilities we automatically drop from cash flowing 350 on a duplex to 50 because our water, electric, etc is about 300-400 a month between the two.

Not sure what to do about it, or if maybe we need to just look into a different area...

Again thank you everyone for your feedback, your insight has given me a lot to think about and brought up some good information that I will need to figure out what my course of action should be.

I'm investing in Cleveland and Youngstown. My Cleveland property is my primary, and I started house hacking to save money on my mortgage and help pay off my student loans; I didn't buy it as an investment property as I didn't know I wanted to be an investor at the time. I cover all utilities.

I don't pay ANY utilities on my Youngstown property. The tenant has all utilities in her name. We haven't had any issues yet; she's a fantastic tenant. 

When I was a renter in college in Kent, I lived in 4 different apartments/townhouses over 5 years and never had to pay for water.

I did find out that in one area of Cleveland, it's actually illegal to charge the tenants for water. I had never heard of such a thing before. I plan to avoid investing in any areas where that's a law unless I find out it's so widespread, it's unavoidable. 

Nicole we are looking in Cuyahoga Falls, Akron, Stow,  Fairlawn, and Barberton. It seems the sewage fees are exorbitant. So I am trying to figure out what to do with those costs to increase cash flow while still paying for the mortgage and PM fees, which are a decent amount as well. They in general are charging first months rent to place tenants and then 10% thereafter.

@Brandyn Collins Yes, the sewer bills are high in those areas. Akron’s systems were set up so that rainwater and sewage mixed during heavy rains, discharging sewage into the Cuyahoga river and ultimately Lake Erie.

The Lake happens to be where the region’s drinking water comes from and humans discovered about 180 years ago that sewage and drinking water need to be isolated.

EPA mandates required mitigating this and the fix is quite expensive. These rates are not going anywhere but up, though they are stepping them in over the years.

@Ryan Arth

Thanks for the insight, I do wonder what the long term affects will be on home owners and land lords if they continue to rise. There may come a time where the costs are too great for either the land lord or even tenant to be able to pay for the expense... I guess we will have to find out together.

Originally posted by @Nicole Heasley :

I did find out that in one area of Cleveland, it's actually illegal to charge the tenants for water. I had never heard of such a thing before. I plan to avoid investing in any areas where that's a law unless I find out it's so widespread, it's unavoidable. 

 Hi Nicole

Could you refer me to the document and what city is it?

The water is always on the owner of the property but it's not illegal to bill the Tenants as far as I know. Obviously, I'm missing some info 

@Irina Belkofer It's just hearsay from Lakewood, OH residents. As I don't currently invest there, I didn't verify the claims. In Youngstown, the tenants are able to put the water bill in their name.