I mentioned this in another blog post (link post on tips to maximize loan dollars). For a long time, mainly larger buildings were billing back RUBS and it’s also pretty much standard for a single-family rental to make the resident responsible for paying all utilities – this is easy since an SFR has its own dedicated meters. By the way, RUBS = Ratio Utility Billing System. Now even owners of smaller buildings are billing back RUBS (and for good reason). This can very easily be done and there is no need to spend thousands of dollars on purchasing individual meters for each unit. If you haven’t done this yet here are some very good reasons why you should!
- To make more cash flow!
- To encourage your residents to be conscious of usage – when you don’t pay the bill, you don’t care how much you use. We should all do our part to encourage responsible usage.
- To share the burden of rising utility costs – utility costs are going up every year so if you are bearing 100% of the burden, your cash flow is likely going down every year!
- It’s becoming more and more common, so why not?! More and more landlords who own buildings large and small are billing back utilities so it’s time to consider jumping on the band wagon.
So now that you’ve decided to make more cash flow, let’s get in to the nitty gritty. How can you implement RUBS? The first step is to check the local laws about which utilities can be billed back. For example, in San Diego we can’t bill back the gas charges if gas isn’t separately metered, so we typically bill back water, sewer and trash (residents typically already pay electric).
Now there are 2 ways to implement this:
- Hire a company to bill your residents for you – there are multiple companies that can do this for you for minimal cost to you. Typically, there is an initial fee to set up the account then after that there is a service fee of $3-$5 per billing which is passed on to the residents. You will need to send the utility bills to the company as you receive them, so they can bill accordingly.
- Bill your residents yourself – there is a fairly simple way to calculate this. First, determine what percentage of each utility you are going to bill. I typically bill 100% of sewer, 100% of trash and 70-80% of water (depending on how much common water is used – i.e. pool, laundry room, landscaping, etc). Then we calculate the billing for each resident based 50% on the square footage and 50% on the number of occupants.
If you are just getting started in the landlord game or you own just a handful of units, you may opt to bill the residents yourself though as your portfolio grows you may find this too tedious and outsource this. There are plenty of companies out there, a quick Google search will pull up several. One other way to do this is if you use Appfolio’s management software. It is built into their software as a free tool (among many other very convenient timesaving tools).
Have questions? Feel free to reach out and I am always open to hearing your feedback as well!