Many other property owners have told me that they do not have the money to make the initial investment to install meters. But I recommend that they find a way to fund it because the payback is rapid — usually about one year to 18 months, and the revenue recovery is ongoing. For example, when we purchased a 169 apartment home community in Indianapolis, I asked our bank to add the cost of meter installation onto our loan, which they readily did after I demonstrated how the program significantly increases property value. It cost about $225 per apartment home to install the gas submeters at the property, for a total of $38,025, and our mortgage increased by only $500 per month. The gas bill for that property alone is $85,000 per year and we recover about 70 percent of those costs, after factoring out common area and vacant apartment home costs, a savings of $59,500 per year, which far surpasses the initial installation cost. Another benefit is that our property value has increased exponentially, which I calculated by taking the $59,500 at a 9.5 percent cap rate (rates can vary) which raised the property value by more than $500,000.
Conscious Energy Use
An obvious trend has emerged now that residents are responsible for their own utility bills. Before the days of submetering, it was not uncommon to see windows open or hear air conditioners running in the middle of winter with heaters going full blast. It was a way to cool down the apartment, but now that residents are responsible for their own bills, they tend to just turn down the heat.
Accurately monitoring each apartment home’s electrical usage gives greater incentive for residents to conserve energy, since they are paying for exactly what they use. During a one-year period, an average of 17 percent less energy was consumed in the submetered residences.
The results did not disappoint me. In December the bills declined after we began billing residents for their water consumption. In March 2003 and April 2003 bills were approximately $270 per day; May fell to $254. The difference between $462 in April 2001 and $270 in April 2003 is $192 per day – a payback of less than one year. The payback actually is much faster because we are collecting about $2000 each month from the billing program, an amount that should double by year-end as new leases are signed.
Responsive and Professional
We have found Ikehu Utility Solutions to be an extremely professional company. Their representatives are always responsive and attentive to our questions, as well as being very knowledgeable of all state regulations regarding utility billing. They gave us suggestions for increasing our revenue and we have seen a marked increase in collections and revenue since we started using their services. We are very pleased with all aspects of their service and look forward to a long, continued relationship with Ikehu Utility Solutions.
Ikehu Utility Solutions has done an excellent job with our properties. They are very professional and have seamlessly transitioned many of our apartment buildings to the Ratio Utility Billing program, as well as setting up online automated meter reading and billing with our newer properties. I would recommend them to small and large property owners alike.
Adding to the Bottom Line
We have calculated the increase in property value that comes along with submetering. For instance, on a property with 285 apartment homes with an average water bill of $7,000 per month, we can add up to $6,000 or more per month to the bottom line. At a 9 percent capitalization rate, that equates to a property value increase of $800,000.
Hawaii Utility Billing Services
Ikehu Utility Solutions provides Utility Billing services to all Hawaiian islands from our Oahu headquarters. We stay up to date with Utility Billing regulations to ensure proper setup and a seamless, error free implementation. Find out the current utility regulations in your locality.