What is a Utility Recovery Program?
If you own or manage multifamily properties, we will discuss what a utility recovery program is and why it’s crucial for your property.
We will discuss
- What is utility recovery?
- Reasons why you need a utility recovery program
- How to capture data for your utility recovery program
We provide services and free utility audits to communities with 50+ multifamily units.
In 2020, the multifamily industry faced new challenges and costs. As we were ordered to stay home, utility consumption increased dramatically. Combined with rate hikes early in the year, this resulted in utility expenses that were much larger than many had budgeted for. There are two examples why residents should pay their own utility expensise. The first is that waste occurs when we use services we don’t pay for. Lower AC settings, longer showers, lights left on are all symptoms of not understanding the true cost of service. When people pay the bill for their consumption, they naturally tend to conserve.
It’s not uncommon to see a reduction in utility bills 20% once a utility recovery program goes into effect. The second case for charging residents for their utilities is that it reduces the owners liability and provides insulation against fluctuating usage and rates, and it gives owners more control over their pricing matrix. If residents are paying utilities and the vacancy rate creeps up, it’s easier to reduce rental rates or provide an incentive without feeling as much of a pinch. Utility billing increases NOI as much as $40-$120 per unit per month, and cap rate as a result. A property for sale with a recovery program will price out higher than a comparable without utility recovery.
Reasons Why You Need A Utility Recovery Program
- Utilities are among your highest expenses, right after mortgage and taxes.
- Water, gas, and electric rates are increasing across the United States of America.
- Improves your NOI and cap rate.
- Over time you will see as much as a 20% reduction in usage from your residents.
How To Capture Data For Your Utility Recovery Program
Two ways to capture the data needed for billing your residents for utilities are submetering and RUBS. Let's begin with submetering. Submetering involves installing a meter between the master meter and the resident’s unit. Submeters provide a fast ROI, often under 6 months. When submeters cannot be installed, a ratio utility billing program may be a good alternative.
RUBS programs are a good method for allocating utility expenses in communities built before 1980 due to older plumbing configurations that may render submetering impossible or expesive. RUBS will provide an goal for residents to save on utilities since they are now paying a bill. Over time, utility billing decreases by 20% in under 6 months.