There are many ways to increase the net operating income (NOI) of your property. Across the country, property owners are searching for ways to increase their revenue since the usual tactics – like raising rent – aren’t always possible.
A great – and obvious – way to increase your NOI is by reducing your expenses. With a utility-centered approach, you can increase your property’s income and help the planet. The approach is simple: cut costs by cutting back utility use. Here’s why that can have an impact on your expenses.
Energy rates are rising
Back in 2019, the U.S. Energy Information Administration (EIA) reported that the average monthly electric bill for residential customers was $115. That year, the average price of electricity was 13.01cents/kWh. Of course electricity rates vary from place to place, but since 2019 energy rates all over America have been on the rise.
In fact, home energy prices have outpaced inflation which is already at a 40-year high in the U.S. according to the Guardian. With the cost of energy on the rise, it doesn’t help that households waste a lot of electricity. Studies have shown that 35% of residential energy consumption in the U.S. is wasted energy.
Water is being wasted
In a year, the average family spends more than $1,000 in water costs. Based on information shared by the U.S. Environmental Protection Agency (EPA) the average American uses 82 gallons of water per day. This means that in a 30-day period, a family of four uses almost 10,000 gallons of water. Leaks make up a significant portion of that; the average family can waste over 700 gallons per month just from household leaks.
Targeting household utilities is a smart strategy for decreasing running costs since there are many simple strategies property owners and tenants can use to reduce utility consumption and reduce utility bills.
Conservation vs Efficiency
Both conservation and efficiency are means of reducing consumption of a resource – whether that resource is water, energy, or something else. It’s tempting to use the words ‘conservation’ and ‘efficiency’ interchangeably. But in reality, conservation and efficiency refer to two different – but related – things.
Conservation is about adjusting behaviors and habits to use less water/energy, while efficiency refers to using less of a resource to perform the same function. For example, installing energy efficient lights is an energy efficiency method, while turning off the lights when they aren’t needed is an energy conservation method.
Your tenants are key in your conservation strategy
There are many things that a property owner can do to facilitate lower water and electricity use on their property. WaterSense labeled products are 20% more water-efficient and perform as well as (and sometimes better than) standard models, according to the EPA. You could replace old, inefficient faucets on your property with WaterSense labeled models, but if your tenants continue to leave the faucet running while they brush their teeth and shave, a lot of water is still being wasted.
Share conservation tips with your tenants so they are aware of the things that they can do to conserve water and energy. A study by the Yale Program on Climate Change Communication found that Americans are becoming increasingly worried about global warming and increasingly supportive of climate solutions. It’s likely your tenants are interested in conservation and just need to be equipped with the knowledge and tools necessary to get involved!
Go a step further and share utility data with your tenants. Let them know just how much their unit, or even the whole building, is using. This can empower them to make informed decisions about their utility use. They can track the efficiency of their unit, and get the information that they need to refine their personal conservation approach and be even more conscientious about utility use.
One way to do this is by sharing utility data in a newsletter that highlights conservation trends on your property. Technology can be a powerful asset to the modern property owner, especially where conservation is concerned. By using a smart billing company, you can get access to software that simplifies the communication of utility data and also gives tenants tips they can use to lower their usage.
Billing: a better incentive to conserve
It’s easier to stay on track with conservation goals when you’re accountable for your consumption. Seeing month-to-month utility costs and trends can provide motivation, more so if you’re financially responsible for the utilities you use.
A study compiled by the National Apartment Association and the National Multi Housing Council showed that residents manage their utility use more carefully when they have to pay separately for their share of the water service as opposed to when these costs are embedded in rent. This study found that implementing a ratio utility billing system (RUBS) in particular resulted in an approximately 6-18% reduction in water use.
How RUBS is a tool for conservation and cost cutting
A ratio utility billing system divides a property’s utility costs among residents based on selected criteria. This system takes into account many different factors, like unit occupancy, common area amenities and square footage, to ensure fair and accurate billing to tenants.
Property owners and tenants can build a community of conservation around RUBS. As a property owner, when you use this system, you make your residents aware of what their share of the utilities are, keeping them informed of trends and incentivizing them to conserve. By actually making tenants directly financially responsible for their utility use, you can offset the rising costs of utilities and increase your bottom line.
There are important guidelines to follow with RUBS implementation. For example, in rent-controlled markets, tenants can only be enrolled on turnover. A utility billing expert can help you navigate RUBS implementation and get the maximum possible benefit out of this system.
Livable is a leading residential and commercial real estate utility billing company with the mission to promote conservation through billing and education. With our suite of cloud services, we can help you reduce your consumption while adding to your bottom line. To learn more, visit our website at livable.com