If your apartment complex includes utilities in rent, attach yourself. The costs of utilities are increasing, which can undermine your hard-earned profits. It is even more disturbing that you are responsible for significant expenses that you have little or no control over. The model included in the “utilities” gives you the direct financial mercy of tenants, their propensity to use and utilities. “Utilities included” also means that you must be an accurate budget predictor for your rental rates to cover annual utility costs. Skip the mark and you will pay.
The exciting news is that you can quickly and easily change this situation by separating utilities from rents and landlords directly - free of charge for you. By doing this, you will have a positive and immediate impact on your net operating income (NOI) and the value of your property. In terms of price, your complex will be more attractive to potential tenants, and you would really remove yourself from the utility equation. Billing residents means that you no longer worry about the consequences of using a runaway tenant, and this leads to an increase in profits.
The sooner you start, the better, especially considering the trajectory of utility rates. They seem to only move in one direction ... up! This year, water rates for owners of apartment buildings in Houston increased by 30%. In New York, the water level rises by almost 13%, and in Milwaukee, they are projected at 27%. In Jacksonville, utility rates will increase by 9%. Owners who cannot adjust the rent quickly enough to cover the increased costs immediately fall into their income.
Utilization of utilities is another reason why apartment owners and real estate managers should closely monitor utility rates. You probably rented a tenant who, during the winter, raises his thermostat to “high” and then opens the window so that he can have fresh air. Or you rented a tenant who leaves the air conditioning throughout the day to return home in the evening to a cool house.
Obviously, these are examples of expensive and wasteful ways to use heating and cooling. However, the tenant does not bear the cost of this increased consumption. What is also problematic is that tenants believe that they can use the utilities in any way they consider acceptable, because the “utilities are included”. In their opinion, they are already paying these costs.
Another internal disadvantage of the “included utilities” model is that it does not offer any financial incentives for tenants to notify about property management in the event of maintenance problems. Water leaks are a great example. Broken toilet flaper can waste hundreds of gallons of water in a short period of time. Owners of a tenant relationship inform the service team when a problem arises. Tenants, however, do not pay directly at the expense of water, so there is less incentive for them to respond quickly ... if at all.
Are you a budget expert?
If you include utilities in your apartment complex, you are already familiar with the never-ending version of budgeting. In order to cover utility costs, you need to answer questions such as:
- What percentage will increase this year?
- Where should I set the rent in order not to lose money?
- How much water, gas and electricity will residents use?
- How can I cover utility costs and still keep my rent competitive?
Some owners prefer to set their rental rates high enough so that, in spite of everything, utility costs are paid. However, this may adversely affect your occupancy rate, putting your complex at the upper end of the price curve and making it less attractive to potential tenants. The downside is that if you set the rent too low, you risk losing money.
Nervous about changing?
Some property owners and owners have initial concerns about disbursing utilities from rental and billing contracts directly. They fear that tenants will leave or that they will make their apartments less attractive than their competitors, which include utilities. Then you should think about how a potential tenant can evaluate two different apartments: one with utilities and one with the program for calculating utility bills.
Suppose you offer a two-bedroom apartment for $ 750 per month (utilities paid by a resident), and another complex on the way offers a two-room apartment for $ 800 a month (including utilities). Naturally, your complex will be more attractive in terms of rental prices, and all other things being equal, there will be more traffic. But your property is also more profitable in terms of the total cost of housing. That's why.
When residents are billed for utilities directly, whether through the Ratio Utility (RUBS) payment system or utilities apprentices, they can affect their own monthly housing expenses. If they keep utilities, their bills will be lower. And if tenants quickly report maintenance problems and minimize wasteful use, all utilities will decrease.
Financial Impact on Conversion to Payable Utilities
An analysis of the financial advantages of tenant tenants for utilities is worth it. Suppose you have a complex of 150 units, and the monthly water bill is $ 6,300. If you can transfer 80% of this bill back to the tenants, you will understand:
- Monthly savings: 80% x $ 6,300 = $ 5,040
- Annual savings: 12 months. x 5,040 = US $ 60,480
What do you need to invest to achieve these savings? Nothing more than your time. And if you use a third-party billing provider, the time requirement is almost nothing.
It is easier than you think.
The exciting news for owners is that you can quickly and easily separate utilities from tenants and tenants of bills directly for water, gas and / or electricity. You can even include trash, cable, internet, rental or other recurring charges in your cart to make it easier for tenants to pay.
The two most widely used multiplayer billing methods are:
- Bank accounts
- Sub-account billing
RUBS or Ratio Utility Billing System is a method of allocating utility costs to tenants based on the number of passengers, apartment size or some other factor. Submetrical accounts require the installation of a utility accounting system to directly measure tenant use. This data is used to calculate residents ’accounts.
RUBS is a great way to get started
The fastest, least expensive way to transfer utility costs back to residents is to implement RUBS. Here are the steps:
# 1 - Utility billing rules in your state, county and city
While most states approach billing for utility bills in a similar way, several states have unique rules. For example, in Colorado, if the owner has a signed rent, stating that residents can be billed for utilities, you can return the full amount of the meter with a master tag. The owner does not need to take deductions for the total area of any kind.
However, in Texas, you not only need a rental agreement signed by a tenant that permits the payment of utilities, the Texas Environmental Quality Commission (TCEQ) has specified how bills should be calculated and owners of obligations should be accepted.
Study the regulatory laws in which your complex is located, or more from a third-party billing provider to perform this task. If you are conducting your own research, your local or state housing association will be a useful place to start.
# 2 - Give tenants a new lease or lease
Each resident must sign a lease agreement that the property owner / owner can pay for utilities. At a minimum, the addition to the lease should include: how the invoices will be calculated, when payments are made, any discounts on the total area (CAD). A sample lease agreement from TCEQ is listed at the end of this article.
# 3 - Set up the payment process
For example, to initiate a billing for water for water, you will need data on the mailing list, employment figures for each household, and a copy of the master meter invoices. Every month, you will view updated relocation / relocation data to make sure you have billed the appropriate tenants.
Use the information (see above) to calculate tenant bills. Set a payment schedule. For example:
- The settlement period is from the 5th to the 5th. You want these dates to coincide with the master meter billing period.
- Delivery Date - Bills will be delivered on the 10th
- Deadline - Bills must be exhibited on the 25th
- Last notification date - Late emails will be sent on the 30th
# 4 - Notify tenants
We recommend notifying tenants in advance of sending the first bill and clearly indicate how this process will be administered. Be sure to include accurate contact information and how bills will be calculated. Some property managers hold Q & A meetings in the community to provide a forum for residents to ask questions and encourage a smooth transition.
# 5 - Send first utility bills
When you send the first invoices, make sure that resident support is supported. We recommend offering different payment options so that tenants can pay by mail, by phone or via the Internet via the Internet. Determine clearly what payments should be made and where these payments should be delivered.
# 6 - Payment Processing and Overdue Account Management
Payment processing, collection adherence and management reporting is a time consuming process. To keep track of your financial transactions, it is useful to use an accounting system or billing utility. Be vigilant in notifying tenants when they are overdue, as this will improve collections.
Conclusion
There is a real opportunity for apartment owners and property managers, who are currently including utility bills for rent, to improve their profits. By separating utility costs and landlords directly, owners can increase the value of their properties, isolate them from the increase in utility prices, and benefit tenants. Third-party billing providers can help you get started quickly, manage the process wisely on your behalf and allow your employees to focus on other important responsibilities.
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Appendix No. 1 - TCEQ Example of a lease for the allocation of water / wastewater costs
1. Adding. This is an addition to the TAA Rental Agreement for Apt. No. ___________________ in _____________________________________ Apartments in _________________________________, Texas.
2. The reason for the distribution. When water and wastewater bills are 100 percent paid by the property owner, residents have no incentive to save water. This leads to a waste of our state’s natural resources and adds to the overhead of property, and this usually means a higher rent. Distributing water bills saves money to residents because it motivates them to save water and wastewater. As owners, we also have incentives to conserve because we are obliged by law to pay part of the total water bill for the entire housing community.
3. Payment Term. Payment of your water / waste water bill should be made 16 days after it is mailed or delivered to your apartment. You agree to the sending or delivery of the payment at the place specified in your account so that the payment is received no later than the deadline. If you do not receive timely payment, you will pay more than 5 percent of your water / wastewater bill. If you are late for a water bill, we cannot cut off your water; but we can immediately use all other remedies, including eviction, as well as late payment of rent.
4. Distribution procedures. Your monthly rent for a TAA does not include water and wastewater. We can include this product in a separate and separate fee as part of a multi-user account. Instead, you will receive a separate bill from us every month for such utilities. We will allocate a monthly water / wastewater meter to the apartment community based on the distribution method approved by the Texas Environmental Quality Commission (TCEQ) and described below. The allocation method that we will use when calculating your account is listed below and described in the next subsection of section 291.124 (e) (2) (A) of the TCEQ rules (check only one):
- unit (i) actual occupation;
- (ii) the employment ratio (average TCEQ for the number of employees in a unit);
- unit (iii) average occupancy (TCEQ ave. for the number of bedrooms in the block);
- a unit (iv) a combination of employment and square feet of flat; Egypt
- division (v) mixed hot / cold water, ratio to total.
The normal date on which the utility company sends us a monthly bill for the master of water / wastewater is ______ day of the month. Within 10 days after this, we will try to distribute this counter among our residents by invoicing.
5. Deduction of the total area. We will calculate your allocated share of the accrued water / wastewater value in accordance with the rules of the TCEQ. Before calculating our part of the bill, we deduct for the irrigation of landscape design and all other uses of the total area, as required by the TCEQ rules. We will also deduct for any utilities and customer service fees so that you do not pay any part of such fees for free units. No administrative or other charges will be added to the total water / wastewater bill, which will be allocated without the express permission of the TCEQ rules. No other amounts will be included in the invoice, except for your outstanding balances and any late fees that you incur. If we are unable to pay our invoice to the utility in a timely manner and incur penalties or interest, no portion of such amounts will be included in your bill.
6. Changing the distribution formula. The above distribution formula for determining your share on a water / wastewater meter cannot be changed, with the exception of the following:
(1) a new formula approved by TCEQ;
(2) you will receive a notification of the new formula at least 35 days before its entry into force; and
(3) you agree to change the signed lease term or a signed mutual agreement.
7. Previous average. In accordance with the TCEQ rules, you are informed that the average monthly bill for all residential units in the previous calendar year was $ _______ per unit, varying from $ _______ to $ _______ due to the lowest months for any unit in the residential community for this period, if information is available. The above amounts do not reflect future changes in water indicators in a utility company, weather changes, total water consumption, residents. water consumption habits, etc.
8. The right to view records. During normal business hours on weekdays you can check:
(1) our water / wastewater bills from a utility company;
(2) our calculations of your monthly allocations; and
(3) any other information available to you in accordance with the rules of TCEQ. Please provide us with reasonable advance notice for data collection. Any disputes related to the calculation of your account will be between you and us.
9. TCEQ. Water distribution billing is regulated by TCEQ, which published a summary of the rules (called tenant's guide). A copy of this summary or a copy of the rules is attached. This supplement complies with these rules.
10. Conservation measures. We agree to make every effort to eliminate any leaks of water inside or outside your apartment no later than 7 days after they are examined. You agree to make every effort to conserve water and report leaks.
