Why Submeter Apartments?
For an apartment community, covering the cost of utilities in the absence of unit meters involves forecasting the expected annual cost and embedding it in rent. But what happens when the utility unexpectedly raises rates or consumption escalates beyond the expected value? The answer is simple – lost revenue. The real question is what can be done to control utility expenses, adjust to utility rate increases, and reduce consumption? That answer is also simple – install submeters.
- Reduced Consumption – There is an old adage, “out of sight, out of mind.” When residents don’t pay for a resource directly they have no incentive to conserve. Shifting the utility payment paradigm from the property to the consumer creates an immediate reason for tenants to reduce consumption. Leaks and other issues are quickly reported. Residents become responsible, and responsibility changes personal habits. Statistically, installing submeters, and billing residents directly for their usage reduces consumption by 20-40%.
- Revenue Recapture – Billing tenants directly for what they consume creates a revenue recapture stream that immediately adjusts to utility rate changes or increased consumption. Submetered billing protects property owners and management companies from suffering loss through unanticipated utility changes.
- Increased Property Worth – The worth of a property is determined in part by its capitalization rate (Cap Rate). In the simplest terms, the Cap Rate is the Net Operating Income (NOI) divided by the value of the property. The NOI is the annual income after operating expenses are removed. By reducing utility consumption, and creating a revenue recapture program for the remaining utility charges expenses are decreased and the NOI increased. Hence, the Cap Rate is positively affected, which increases the actual worth of the property.
Why install submeters? For a small initial investment, an apartment community can reduce consumption, recapture revenue and increase property worth. Fill out the form below and a Think Utility Services representative will contact you for a free site survey.