It’s Tuesday and time for another installment of Apartment Budgeting. This week we talk water. We all know that utilities are likely the fastest growing line item in your annual budgets. And, if you haven’t tapped in to sharing this expense with residents – then read on. But, more important – act. If you have tapped in – please stick around and add to the discussion at the end. As I am sure to leave some important details or alternative angles out.
It is known as RUBS or Ratio Utility Billing Service. And, water income is just one piece of the picture. We will discuss the other pieces over the coming two weeks.
Water income is derived from taking your total monthly water bill, applying a ratio formula to it and then billing it back or passing it through to your residents. Now, it is much more complicated than that simple definition but you get the gist.
It is also much more complicated than simply splitting your water bill across the respective occupied units in a given month. And, don’t be tempted to take the easy way out and settle on billing a per unit type flat rate. It’s tempting to do it this way but trust me – it’s much better to partner with a company versed in this art we call RUBS.
*Item of particular merit about utility billing – this is a highly regulated business and you are not a utility company. Under no circumstance can you bill back or pass through a number that is in advance of your monthly bill. You will love not the consequence if you are caught.
There are a number of good companies out there to partner with. Our friends over at Appfolio Yardi and RealPage, just to name a few, offer it as an add-on to their respective property management software packages. Or, there are independents that focus 100% on utility billing. Either option is okay. I am personally a fan of working with your PM software provider.
This a bit more complicated than looking at trailing information. Given the fact that utility spends amplify at a pace far in advance of rent growth (save a few crazy good markets in the country) you will definitely want to pass the increases along. The billing will also ebb and flow with occupancy and a number of other factors.
In this case, it’s best to work with a really good accountant who can build a formula into your budget template that considers all the factors for you. I liken this to one of those math word problems that many of us struggled with back in elementary school. Email me if you need help with this one.
Next week we will be tapping the keys about sewer income – smelly as it may be…
Sending my thoughts and prayers to those who have been set back by the Super Storm,
About Mike Brewer
My mission is to tease out the human potential in the multifamily space.