Landlord pays the waterbill

13 Replies

Hey Bp! What is your advice on buying a property where the landlord pays the water bill? Are you losing money? (4 unit)

Depends on the rest of the deal.  In my market it is standard for the landlord to pay water/sewer/garbage.  Plenty of deals cashflow despite this.  Many around here would tell you to figure about 10% of additional expenses from your gross revenue, although your current rates and what other utilities you have to cover obviously make situations variable.  If you are worried about it some recent bills should be easy for the current owner to provide as part of your due diligence.  If covering water isn't typical for your market and the units are in demand you could consider switching this to tenant pay and improve the property's performance. 

Can you put in separate meters or submeters to charge water consumption back to the users?

Its pretty typical in many areas, especially areas that aren't newer, due to the fact that seperate water meters weren't available. That's why you see so many rental units that landlord pays water. Don't let it scare you.

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Depends also on where you are.  Water is probably not as big a deal in Maryland as it is here in California.  I own two rentals and also live in a rental, and in all three cases the tenant pays the water.  However, I lived in a previous rental where the landlord paid half of the bill each month to ensure the landscaping was properly maintained (we simply told them what we paid each month and they reimbursed us half).

There are a lot of ways to do it.  My suggestion is have a position in mind, one way or the other, but be open to your tenants if they want to do something different (this shows them you are willing to be responsive to their side, which can beneficial in future interactions).

Vincent

Vincent Aiello I totally agree with you, in Southern California we are in an emergency drought and because of this the water bill fees are tiered based on usage. I pay the water bill (and trash). If you are purchasing a multifamily with one water meter you can request the copies of the water bills to see the usage when all the unit are occupied and in the summer vs winter. That will give you a better understanding of your water bill expense when your factoring your cash flow and if that's going to make or break your deal. To help lower the cost of the water try switching to low flow toilets, water conserving faucets and shower heads.

where I invest the water/sewer/trash has to be in the owners name so I just back charge the tenant every month. 

Hi Phillip,

Where we invest, most 2-4+ multifamily do not have separate water meters- there are a few duplexes that are separate but I haven't seen any 3-4 units that are.  I looked into dividing the water and metering for each unit, it is expensive to do it that way and have it billed separately.  Our municipality bills every 2 months and had a minimum charge- in a lot of cases the usage per apartment would be less than the minimum so they would be paying more for water.

I just call the water company and get the average bill over the last year, and factor that into my monthly expenses for  a property before we make an offer.  We get some bills that are a bit higher than normal but also some lower, so it all works out and we aren't losing money.

Kelly

Originally posted by @Account Closed :
Hey Bp!

What is your advice on buying a property where the landlord pays the water bill? Are you losing money? (4 unit)

 All of the MFH's I've purchased in NYC are single water meter, so I've been responsible.  Never had any major issues as a result, just factor it into your calculations/pro-forma to analyze for the added expense appropriately.

As for what that expense is, it's all market specific of course.  I can't comment on anything outside of NYC, however there I historically run around $100/unit/month for water & sewage - that's for typically a 3b/1ba apartment.

Yes sub meter it! A water bill is a cost which will never go away. 

My current project has nine separate services which was expensive and is a bit of a PITA to transfer the water bill to the tenants. My next project I'm going to use private meters. A number of companies offer electronic ones for painless off site meter readings and billing.

I would also add that an important part of your inspection process should be to take a look at what is using water in the home.  For example, a couple of my duplexes were built in the 70s.   There are two houses on the same street built by the same builder (same exact floorplan to be exact).   The water bill for one duplex is currently $1k more than the other.

Guess what?  They have older toilets that use more water and old showers.   Guess what, I'm going to upgrade your bathroom!   Here's some nice new tile, new hardware, and a brand new toilet.   But I'm going to claw back a good bit of money per year by cutting water usage substantially.

The one time I left the water in my name, I ended up with a water bill over 5 grand. Don't do it.

Where I invest also water/sewer/trash is paid by owner and billed back to tenants. 

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