How to Bill Tenants for Utilities the Smart Way
One of the best ways to boost your bottom line is to bill back utilities to your residents. Knowing which method to choose is essential for creating a program that increases your NOI without putting you on the wrong side of your residents and local regulators.
The first reason to consider billing residents for utilities is that it will lower your monthly operating cost. We’ve had owners tell us that residents ran the shower all night so they could sleep or had the a/c running with the windows open. Utility waste can hurt the bottom line, and residents have no reason to conserve if they are not responsible for the usage.
Not all utility recovery programs are created equal, though. There are many considerations in developing the right program for your community. You want to aim for the highest amount of recovery possible, without violating regulations or making residents feel cheated. Flat-rate plans can punish residents who are conservative with their usage or spend limited time at home. Additionally, full recovery will never be achievable under a flat-rate billing program.
Submeters are an excellent option if you are undertaking new construction or can retrofit your buildings. Submeters, like other improvements, increase your asset value. Residents are responsible for their direct consumption. Disputes are rare since the meter only records the residents’ usage. A bonus is residents will report leaks quickly. The upfront cost to install quality submeters has a fast ROI, and quality meters installed by master plumbers have a long lifespan.
If submeters are not feasible, a Ratio Utility Billing System (RUBS) provides many of the same benefits without the upfront cost. RUBS programs should be customized for your unique community to be code-compliant, fair, and provide the highest legal recovery. The resident pays the bill and will likely make an effort to conserve and report leaks quickly. A RUBS program can be implemented as new residents move in when leases renew, or a combination of both. Even Forbes thinks a RUBS program is a good idea for multifamily owners.
Aside from the type of program, it’s essential to understand and comply with your local utility regulations and legal requirements for lease language. If you’d like to learn more about utility billing programs and how they can benefit your community, contact us for a complementary utility analysis.
Multifamily Utility Company
Multifamily Utility helps multifamily property owners with 20 or more units with code-compliant utility recovery programs designed to increase NOI and improve cap rate. We design, install, and maintain submeter systems and customized ratio utility billing systems throughout the US.