Considering a New Property Investment? These 4 Utility Billing Questions

Considering a New Property Investment?

These 4 Utility Billing Questions Are Crucial

When diving into the acquisition of multifamily properties, one aspect often underestimated is the utility infrastructure. Here's a checklist of key inquiries to guide your assessment of utility billing systems while exploring potential investments.

Understanding the Impact of Utility Billing on Your Investment

In the realm of multifamily or commercial property investments, the utility billing setup significantly influences your Net Operating Income (NOI). Despite its significance, many investors overlook utility billing during their due diligence audits. To prevent future complications, it's essential to address the following questions when evaluating potential investments.

1. Is There an Existing Utility Billing System?

First and foremost, ascertain whether the property has a utility billing system in place. This could manifest as:

• A submetering system, providing individual unit utility measurement for precise billing.

• A Ratio Utility Billing System (RUBS), proportionally allocating utility costs to tenants.

Both methods offer avenues for enhanced utility cost recovery. If implementation is required, partnering with a utility billing specialist can streamline the process and ensure optimal system selection.

1. Are Submeters Functioning Accurately?

In properties equipped with submetering systems, ensuring accurate readings for each unit is paramount. While assessing every unit's functionality during property inspection might not be feasible, inquire about past performance and any encountered issues. Consider leveraging identified issues for negotiation purposes and prepare for post-acquisition system repairs if necessary.

1. Are Undetected Leaks Present?

Leaks, particularly in large multifamily complexes, pose significant challenges:

• Unrecovered costs: Undetected leaks between master and submeters can lead to substantial revenue loss.

• Billing inaccuracies & tenant dissatisfaction: Misattributed leaks can result in inflated bills and tenant disputes, potentially culminating in turnover.
  

Prioritize leak detection assessment during property evaluation, accounting for potential post-acquisition issues. Collaborating with utility billing experts armed with comprehensive analytics can aid in identifying overlooked leaks.

1. Is Resident Bill Payment Consistent?

A robust utility billing system hinges on timely and complete resident payments. Assess the current residents' payment reliability and contemplate strategies to improve payment compliance if necessary. Issuing fair, transparent bills at regular intervals fosters a positive tenant experience, contributing to improved payment consistency.

Conclusion: Utility Billing Matters

In the pursuit of sound investments, meticulous evaluation of potential property challenges is essential. The utility billing system's capacity to recover costs significantly impacts investment returns. Partnering with experienced utility billing consultants facilitates informed decisions, ensuring optimized revenue streams and long-term investment success.