Finding Yield through Multifamily Utility Management
Multifamily operators can’t afford a set-it-and-forget approach to multifamily utility management. Water, gas, sewer, trash, and electricity have become complicated to administer for property management portfolios. Finding yield through managing utilities now takes a strategic approach.
Regulations that vary from state to state cloud the water for property managers who go it alone in apartment utility management. And choosing a path of least resistance to resident billing and maintaining the status quo can get portfolios into trouble. Without constant attention, property risks not recovering enough expenses from residents, leaving money on the table.
But within state and local compliance are opportunities for property managers to not only recover apartment utility costs but also increase NOI. Utility management advisors can help lead the way.
‘Every dollar counts’ in multifamily utilities
Amye Baker, who is Vice President of Product Success for RealPage Utility Management, notes finding or saving money on utilities can be done simply by understanding compliance.
For instance, in Texas, property managers can choose to allocate utilities using a RUBS billing method based on the number of bedrooms the property has to offer when sub-meters are not installed in each unit. Rates billed per bedroom are based on the assumption that all units are occupied.
It’s a simple billing method that requires little month-to-month administration and is effective as long as occupancy levels stay constant. But when occupancy dips, the property can find itself on the wrong end of utility billing. As more units become vacant, the property’s resident recovery income drops. Ultimately, the property won’t be able to recover as much of the expenses they are being billed by the utility company as they could with a different approach.
A utility management advisor might recommend a billing method that excludes the use of vacant units to drive a higher overall recovery rate. The advisor would work with the client to ensure the proper lease disclosures are put in place and then administer the bill method change so all the property has to do is focus on keeping apartments full.
Such is the role of a RealPage utility management advisor. Specialists well-versed in managing apartment utilities help clients navigate the complicated world of water, gas, electric, and other services to maximize the amount of costs they can recover.
Usually, they find more dollars by peeling back the layers to offer complete visibility.
“Every dollar counts,” said Baker, who oversees a team of advisors for RealPage’s Utility Management program. “When we’re making these recommendations we want to provide the full 360 view. You’ve got to show what the impact will be to resident bills on a monthly basis, and we have that discussion with the client so that they can make a fully informed decision.”
A valuable service is the advisor’s ability to not only make billing recommendations but uncover opportunities that generate income. Each solution is customizable with the purpose of improving NOI.
“Every year we find millions of dollars of opportunity,” Baker said.
Properties are realizing big savings in multifamily utility management
Year to date, RealPage Utility Management has identified more than $31 million to improve property NOI through changes to clients’ utility recovery programs. Of recommendations identified in the past year, clients have already implemented changes that will drive more than $6 million in NOI improvements.
Among them are a pair of property management companies that have enjoyed significant improvements. Each were able to phase in updated fee structures, beginning with new move-ins and renewals, to recover money for services that weren’t being fully billed – or billed at all.
In one case, an analysis found that a client could increase NOI by nearly $100,000 after a comparison of actual expenses to flat fees billed to residents for apartment garbage collection. Because the fees didn’t cover the client’s expense, a plan in line with local utility regulations was rolled out to increase monthly billings.
Another client wasn’t billing stormwater fees at all properties, nor charging administrative fees permissible with proper lease disclosures. The average monthly increase per apartment was $3.65, which the client elected to implement on new move-ins and renewals. The policy change will ultimately drive an additional $236,000 in NOI across the portfolio.
Important more than ever to be on top of utilities
Baker said the benefit of working with a utility management advisor extends beyond uncovering hidden yields with trash and stormwater fees. It’s staying on top of expenses that have become moving targets in recent years.
Working with a comprehensive multifamily utility management program opens opportunities to prevent or reduce expenses, or recover more from residents. Now, more than any other time, it makes sense.
“We’re not seeing a decrease in utility expenses,” Baker said. “We’ve definitely seen an increase in recent years, and we don’t see anything slowing down.
“It’s more important than ever to work with a utility advisor who understands how to navigate the complex utilities world and find ways to improve NOI, whether it’s through targeted opportunities to reduce expenses or improving utility recovery.”
Learn more about how RealPage Utility Management Solutions can enable properties to find yield through its comprehensive utility management suite of solutions.