That being said, why is it that so many property owners continue to give away unlimited free water and sewer when it would be so easy for them to bill via submeter or RUBS? Some of the explanations we hear:
Property Manager: “We’ve always included water with rent. We see no reason to change now.”
Steve Hirsch: In rare cases where a property’s water and sewer costs haven’t increased significantly enough to impact Net Operating Income in a substantial way, this argument is perfectly sensible. But most properties are experiencing rate increases that outstrip even medical costs. Although it was no problem to give away free unlimited water 25 years ago, that is no longer the case. My article in Florida Apartment Association’s eConnect shows how billing residents for water enables them to save money while increasing your profits.
Property Manager: We fear losing good tenants if we begin billing for water.
Steve Hirsch: Submetering and RUBS are common practices. The vast majority of tenants do not object. Taking a 200 unit property with average $800 rent and a $10,000 water bill exclusive of common area, the math usually works something like this:
- Two or three tenants move out and are replaced within a month or two, causing a one-time loss of about $3,000 revenue.
- The property gains recurring revenue of about $8,000 per month.
- Common strategies to soften the impact of utility billing is for the property owner to subsidize a percentage of each unit’s water and sewer bill for the first 3 to 6 months or to give each unit a fixed monthly credit against the utility bill.
Property Manager: “Our occupancy is low. We’ll start billing for water once we reach our occupancy goal.”
Steve Hirsch: New tenants should be trained to pay for their own water and sewer use from the get-go. Otherwise, new tenants will feel ambushed when utility billing is enacted shortly after they move in.
Property Manager: “We know that we should be submetering or RUBSing the property and we fully intend to do it. But how do we compare one billing company to the next?
Steve Hirsch: Now you’re talking! I thought it would be a good idea to write a primer that explains how to compare billing services. Fortunately, Florida Apartment Association agreed and published my article. Read about how to compare submetering and RUBS services here.Is there such a thing as a multifamily or commercial property owner that wouldn’t like to recover water and sewer costs from tenants? Of course, it is not cost effective to submeter certain older properties and RUBS is not permitted in some locales. But experience tells us that almost every landlord that doesn’t already recover water and sewer costs would like to do so if possible.