October 23, 2023
4 Steps to Ensure Your Property is Suitable for Submetering [Checklist]
Retrofitting submeters into an older multifamily property can be a wise investment for property owners and management groups – so long as your multifamily property is suitable for submetering. Here’s a checklist to help you make that determination.
Unlike including utilities in the rent or charging a flat fee, submetering allows property owners to measure the utility usage of each individual unit in a multifamily property. With that usage data, they can then fairly bill back residents based on the amount of a certain utility they used.
This billing method results in greater cost recovery and more predictable NOI month-to-month, increasing the overall profitability of the property.
It’s clear why property owners with older multifamily buildings in their portfolio want to implement a submetering system. However, not every building is suitable for installing submeters. If you’re thinking of installing submeters in an older multifamily property, there are a few checks you should do to determine if your building is suitable for submetering.
#1. Review Local Regulations
Before moving any further in your assessment, it’s critical to ensure submetering is legal for your multifamily property.
Many local and state governments have legislation on the books regarding submetering. Some completely outlaw the use of submeters to bill back tenants for utilities. Others place stipulations on the manner in which you can use submeters on your property.
Regardless, it’s important to check local regulations before starting any type of submetering project to ensure your multifamily property stays in good standing.
#2. Assess the Building & Current Utility Infrastructure
Once you have assessed the legal stipulations regarding submetering, you then need to assess the state of your building, paying particular attention to the utility infrastructure.
In many older buildings, utility infrastructure like wires and plumbing may be set up in a way that makes the installation and use of submeters near impossible.
For example, in older buildings, it’s common for each floor to have bathrooms clustered together and kitchens clustered together, with each cluster supplied by its own riser. If you were to install a submeter on those shared lines, you would be measuring water usage from multiple units, making fair allocation tricky. A setup where each unit on the floor is fed by its own riser is much more conducive to submetering because you can fully measure the water usage of each unit without the possibility of shared usage between units.
The age, condition and general layout of the building should also be considered here. Outdated plumbing and wiring systems can be costly to retrofit with submeters. Plus, some structural demolition could be required to reach the optimal installation point, driving up costs.
#3. Review Your Budget
Retrofitting an older property with submeters is a major project, and that project comes with many up-front costs. It’s important to ensure your operating budget can handle these costs.
Unlike their master meter counterparts owned by the utility, submeters are bought, paid for and owned by the landlord, property owner or management company.
On top of that, submeter installation is a major project that requires a licensed and reputable professional installer. It’s not something to be done by in-house maintenance teams or a general contractor.
The good news is if your budget can handle these up-front costs, you will see that return on your investment in the form of greater utility cost recovery, utility cost savings and more predictable NOI over the life of your property. Eventually, those improvements in utility cost recovery will pay for the system.
#4. Gauge the Surrounding Rental Market and Tenant Expectations
Lastly, once you’ve determined your building and your budget can support submetering, you should investigate the surrounding rental market to determine if your property can remain competitive with a utility bill back.
If you charge a flat rate for utilities or include utilities in the rent, switching to a billback program will be a change for your tenants that impacts the overall tenant experience. It’s important to ensure it’s a change that won’t drive them to look elsewhere.
If you decide to switch to submetering, it’s critical you communicate this change to your tenants and educate them on their responsibilities and the ways they can save through conservations.
Also, when you start issuing bills, it’s important to make the experience as easy as possible. Some utility billing best practices to follow include:
- Creating fair, defensible bills
- Sending bills out at a predictable and consistent cadence
- Providing a positive billing experience that includes a variety of bill payment options, responsive customer service and digital tools
What If Submetering Won’t Work? Try RUBS
RUBS, short for ratio utility billing system, is a billing method that proportionally allocates utility costs to tenants using an industry-accepted formula. It can be used to bill costs for water, gas, electricity, trash, cable and other services to residents.
If you determine that submetering is not suitable for your property, RUBS is a great, cost-effective alternative to better allocate utility costs, bill back your residents and increase your utility cost recovery without the need to purchase and maintain hardware or pay for installation.
Conclusion: Retrofitting and Managing Submeters Takes an Expert
It is possible to manage a submetering system in-house, but from building assessment and planning to installation and maintenance, it can be a major hassle for in-house teams. Plus, the cost recovery results might not be as good as possible.
That’s where a utility billing expert can step in. The right provider can help perform the necessary audits to see if your property is suitable for submetering. From there, they can use their expertise to ensure the entire utility billing process is fully optimized for cost recovery – from installation to meter reading to bill generation and collection.
Considering submetering for your multifamily property? Get in touch with Synergy. Our experts can help you determine if your property is suitable and get you on the path to a fully optimized submetering system.