July 26, 2023
Billing Back Utilities to Residents: 3 Hidden Benefits
Billing back utilities to your residents is the most direct way to recover your utility costs every month and protect your net operating income (NOI). Why else should you bill back utilities to residents? Here are three hidden benefits.
Behind mortgages and taxes, utilities are the most expensive operating costs for rental property owners each month. But unlike mortgage and taxes, utility costs are variable. Because they depend on your residents’ usage, it’s impossible to perfectly forecast these costs no matter how good the model.
A well-optimized utility billing system can solve for that variability. By billing back residents for their utility usage each month, you can reliably recover that utility cost each month.
Beyond taking a major variable cost off the books, here are a few hidden benefits to implementing a utility billing system.
3 Hidden Benefits of Billing Back Utilities to Residents
Benefit #1: Increase Cashflow
For landlords and property investors, steady cashflow is a top priority.
When you include utilities in rent or charge a flat rate to your residents, you will have to pay the difference when you get utility bills each month if usage rates are higher than forecasted. That extra outflow of cash can be the difference between profitability and taking losses.
Billing back utilities will ensure that you never have to pay utilities out of pocket. It also allows for greater flexibility month-to-month, should problems arise like unexpected repairs or an unexpected number of residents moving out.
Benefit #2: Detect Leaks
Leaks are common culprits that spike usage for your entire building. Time is money when it comes to detecting and remedying utility leaks.
With a utility billing system, you have access to real-time utility metrics. You can monitor how much of the total consumption isn’t being billed back to tenants, indicating a leak somewhere in your building. These metrics can be broken down by the unit, so you can trace the spike, identify the affected units and locate (and remedy) the leak.
Note: You can’t bill back tenants for the leak. It’s bad business, and your residents very well may refuse to pay. Not to mention, it creates an undesirable resident experience that can hurt retention in the long run.
It’s in your best interest to solve leaks as soon as possible, and the metrics you unlock with a utility billing system will help you do just that.
Benefit #3: Incentivize Conservation
Starting a resident utility billback program will also give your residents access to their utility usage figures. With this information, they are more likely to take action to lessen their usage so they can save money. This, in turn, will lessen your master meter bill.
As more residents begin to conserve, you can take advantage of any local incentives for energy-efficient businesses and buildings. Plus, you have the data to prove that drop in utility usage.
How Do I Start Billing Back Utilities to Tenants?
There are two main ways to set up a utility billing system to start billing back your residents for utilities – submetering and RUBS.
#1. Submetering – Utility submetering allows property owners to allocate utility costs fairly among tenants by measuring each unit’s true consumption of water, gas and electricity. Submetering works by installing a meter between the master meter for the property and each tenant’s unit. This provides accurate data for every tenant’s consumption for every utility. And with precise consumption data, you can bill back tenants for exactly what they consume.
#2. RUBS (ratio utility billing system) – RUBS is a billing method that proportionally allocates utility costs to tenants. RUBS is a good substitute for properties that can’t use submetering for technical or practical reasons. It has very little up-front cost and can better approximate actual utility usage each month than a flat fee, so you recover more cost in the long run.
Setting up Submetering or RUBS
While the benefits of setting up a utility billing system are clear, it’s likely you and your management team won’t have enough time to set up the billing system on your own, let alone manage and optimize it.
That’s where an expert utility billing company can help. The right provider can help you design the system, conduct feasibility studies and audits, install the system and set up billing and reporting based on industry best practices.
This allows you and your team to continue focusing on revenue generating tasks like conducting showings, managing rent payments and handling repairs.
Conclusion: The Benefits of Utility Billing are Far Reaching
Starting a utility billing system to bill back your residents allows landlords and property managers to shore up their profitability by increasing their cost recovery and cashflow. But the benefits don’t stop there. Utility billing leads to better visibility of usage over your entire property while allowing your residents to conserve their usage. Everyone wins.
Looking to start your own utility bill back program? Need advice on how to optimize your system? Get in touch with Synergy. Our experts are always here to answer your questions.