How Much Do Property Owners Save on Utility Costs with Multifamily Submetering?

Installing a submetering system is the best way for multifamily property owners to fully recover utility costs each month. You’re not just recovering costs, though – you’re saving. When can you expect to see a return on investment, and how much? We answer those questions and more in this blog.

When you take out mortgage and taxes, utilities represent the largest monthly cost for multifamily property owners and investors. On top of that, utilities are not a fixed cost. They vary from month to month, depending on usage. This makes proper budgeting a challenge.

With a submetering system in place, property owners can take the variability out of utility costs by measuring each unit’s individual usage. Using that information, you can then bill-back residents for their exact usage each month. This leads to more reliable cost recovery each month. Here’s how.

How Submetering Leads to Greater Cost Recovery

Without submetering, many property owners charge tenants a flat fee for utilities. A flat rate simply can’t account for a variable cost. Some months, utility usage for the property may be higher than the flat rate charged to tenants. The property owner has to make up the difference.

Submetering leads to improvements in utility cost recovery. It provides property owners with an accurate and equitable way to bill tenants for utilities. This leads to:

  • More Accurate Billing and Equitable Cost Allocation: Rather than using flat rates or estimates, submetering allows property owners to bill tenants based on individual utility consumption. This accuracy ensures that tenants are charged fairly for the utilities they use. When tenants are charged fairly, they’re more likely to pay their bills on time and in full.
  • Greater Tenant Accountability: Submetering fosters a sense of accountability among tenants regarding utility usage and associated costs. This accountability leads to more responsible usage behavior, which positively impacts cost recovery for the property owner.
  • Less Billing Disputes: Submetering provides transparent and accurate billing based on actual usage data. With that data, utility disputes between tenants and property owners are far less likely to occur. This means smoother operations on top of improved cost recovery.
  • Improved Financial Planning: Submeters collect data. With that data, property owners can gain insights into tenant usage patterns and trends. This information allows for better financial planning and utility cost management.

Of course, installing a submetering system in your multifamily property will require initial investment. The good news is the savings through cost recovery will help pay for that initial investment fast.

How Much Will You Save With Submetering?

While it’s impossible to share exactly how much you can save without knowing the specifics of your multifamily property, there are some general figures that can help you get an idea each month with a submetering system in place.

Here’s how you can think through cost savings.

Average utility cost in a two-to-three-bedroom apartment roughly equals $240 per month for water, gas and electric. If you charge your tenants a flat fee for those utilities, you’re likely recovering around 80% of your total utility costs each month.

So, for every unit using roughly $240 of utilities, you recover $192 of those utility costs each month. The remaining $48 is your responsibility as the property owner to pay.

Now, multiply that $48 by your total number of units. Multifamily properties with over 100 units could mean thousands of dollars in unrecovered utility expenses each month. Those expenses eat into your cap rate and NOI.

With a submetering system in place, you can accurately track utility usage and bill tenants accordingly. This means you’ll have a better way to recover nearly all utility costs, saving your property thousands a month in unrecovered costs. In many cases, property owners begin to see a return on initial investment after only one year with a submetering system in place.

The Other Benefits of Submetering

Besides cost savings, there are many other benefits of submetering that can lead to better property management and more efficient processes.

Provides Detailed Usage Data

Submetering gives you access to more in-depth usage analytics, which show exact usage down to the smallest unit possible. This level of detail allows you to spot any trends or abnormalities in your usage month-to-month, better equipping you to address any problems.

Leak Detection and Maintenance

In properties with water submetering, detecting leaks becomes easier as individual unit usage is monitored. If you notice a spike in usage, that could indicate a leak. Prompt detection and repair of leaks help prevent water wastage, reduce utility costs, and enhance cost recovery for the property.

Incentivizes Conservation

With submetering, your residents know what they’re using each month, and they’re responsible for paying that amount. That means they’re more likely to conserve their usage each month.

When utilities are included in rent or as a fixed fee each month, there is nothing stopping residents from using as much of those utilities as they want each month.

As a result, many landlords see residents cut consumption dramatically after switching to submetering. Not only are you better able to recover utility costs month-to-month, but that cost is less than it was before you installed submeters.

Conclusion: Start Submetering by Partnering with an Expert Firm

Now that you have a better idea of the benefits of a submetering system, you’ll want to get started by contacting an expert utility billing firm. Installing and managing a submetering system is a lot of work that you and your team may not have time for.

By partnering with an expert utility billing firm, you can ensure your submetering system is top-notch and designed to the specifications of your property. This allows you to recover as much utility cost as possible, helping you see a return in recovered costs faster.

Want to know how much your property can save in unrecovered utility costs? Get in touch with Synergy. Our submetering expert will be happy to help you find out.