Tag Archives: increase multifamily NOI

Maximizing Submeter Collections

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Josie yelled at me, “$3.25 a month per unit? Are you crazy?”

Wanting to set her mind at ease, I looked her straight in the face and said “No, I don’t think so.” Probably because my retort was no different than what a crazy person would have said, Josie looked even more convinced that I am one crazy dude.

But I should probably start from the top. Josie manages 3 small apartment complexes that are submetered for water – cumulatively 206 units. She was telling me how displeased she was with the company that was providing Read/Bill/Collect service. Being the salesman that I am, I offered to give her a proposal to take over the RBC service.

When she saw my price, that’s when she yelled at me, “$3.25 a month per unit? Are you crazy?” After my less than clever defense, “No, I don’t think so,” she said “The billing company we use charges only $2.50 per unit. I thought that was expensive. But you want even more. You’re crazy!”

Some guys have a positive effect on women without even trying. Not me. I explained:

“The RBC company that you are doing business with is cheap. $2.50 per unit per month is a great price. But they aren’t performing. Billing is not going out promptly and your residents cannot reach the RBC company’s customer service. Bottom line is that due to poor service, you’re recovering only 62% of water and sewer costs.”

Josie was listening. Maybe I’m not so crazy.

“Your average unit is being billed about $55 per unit per month. If you were recovering 80% instead of 62% of your communities’ water and sewer costs, you would be collecting $9.90 more per unit per month. We charge $.75 more per unit because we invest the necessary money to maximize collections.”

I had her ear. Like I said, I don’t exude an aura that causes women to agree with me. I use reason. It works.

“We spend extra money to properly staff our bilingual customer service department with professionally trained professionals. We also spend time and money on the hawkeye system – this means that we photo-capture the date/time stamps of all outgoing bills. That way, when certain habitual late payers claim that they never got the bill, we can prove that it entered the mail stream.”

Result: My wife still says I’m crazy…but Josie is now a happy client. Want to find out more about submetering or RUBS?

Is the Priority Being Green or Making Green?

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The following by yours truly recently appeared in Multifamily Florida magazine.

 

Charlie McHill invited me to drive four hours to meet him at 8 AM on Friday. Why? He wanted to have fun at my expense – pure evil.

It started three days before when Amy, a property manager friend, called. Over the last few years, I had been to the multifamily that she managed three times to discuss submetering with the owner. His residents were using 40% more water per unit than a comparable property nearby – I knew that for a fact because the other property was a submetering client of mine.

Although the owner was spending $23,000 per month on water and sewer, he couldn’t bring himself to invest $75,000 for a submeter retrofit. Even when I offered financing under very favorable terms, he hadn’t agreed. Instead of doing something about his water and sewer problem, he listed the property for sale.

Good news – after being listed for almost 2 ½ years, the property had finally sold to a fellow named Charlie McHill. Upon closing on the 315 unit property, Charlie met with the property’s onsite manager, Amy. She told him that they should have submeters installed and begin billing residents for water and sewer.  When she told him about me, Charlie told her to set up a meeting that Friday at 8 AM to discuss the possibility of retrofitting submeters. Charlie McHill told Amy that he believed both in being green and saving money.

I knew what a difference it would make for the property’s profitability.  Once residents were paying for their consumption, they would conserve, thus reducing the property’s overall water and sewer bill and of course, the owner would recover costs from the residents. I had studied their water and sewer bills. Being conservative, NOI would improve by about $215,000 per year. 

It sounded like a great lead. As the property is a four hour drive from my house, I left at 4 AM. When I arrived at the manager’s office, Charlie asked me to explain how submetering would benefit him and the residents. Using my nifty PowerPoint presentation, I explained the broad strokes first:

  • When people pay for what they use, they waste less. National studies sponsored by EPA, MultiHousing Council and various utilities demonstrate 15% to 40% less consumption.
  • In Charlie’s case, since I was familiar with an almost identical property nearby, I had good reason to believe that his consumption would go down about 30%.
  • About half of his water and sewer bill was related to consumption while the other half was base rates unrelated to consumption. The estimated 30% reduction in consumption would translate to an approximate 15% reduction in his water and sewer bill – from $23,000 per month to about $19,500 per month.
  • Once we were billing all residents for approximately $19,500 water and sewer costs, a realistic goal would be to recover about 80% of that number – $15,600 per month (more on that later.)
  • As utilities’ water and sewer rates are expensive and will continue to escalate in order to fund needed infrastructure improvements, giving away free unlimited water is going to become even more expensive.
  • The most important factors that impact people’s choice of where to rent are location, rental rate and amenities offered. Whether utilities are included is not an important factor.

Charlie told me that submetering sounded like a great idea. He offered me some coffee and donuts. Gee, what a nice guy…but the expression on his face seemed odd. As we spoke, it seemed like he was trying to restrain laughter.

To find out what Charlie knew that I didn’t, check into our blog next week or contact us, no strings attached…but I will want to learn a little about your property in order to evaluate whether submeters or RUBS would work for you.

Steve Hirsch