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How To Avoid Large Losses On Utility Bills With Your Rental Properties.

NEXUS PROPERTY MANAGEMENT 101:

THE UTILITY OF MONITORING YOUR UTILITY BILLS

How a Couple Minutes a Month Could Save You Hundreds (Or Thousands) a Year!

 

Paying for utilities is one of those inescapable responsibilities for all property owners. More often than not, this task is seen as a pesky chore, and let’s be honest, it can be a pain. However, the smart property owner also sees that utility bills give you insight into how your property is operating. There is a lot you can learn from a bill if you take the time and look at it through a solution seeking lens. Rental properties don’t come with a convenient “check engine light”, but a very close equivalent is mailed to you monthly. And just as ignoring that warning on your car’s dashboard can be a costly mistake, the same can be said about failing to actively monitor your utility bills.

 

 

STEP ONE: DEVELOP A SYSTEM

The key to minimizing negativity that comes with a chore is to create a meaningful system around it. Checking your utility bills can be part of a process where you also tend to other property related issues at a set time each month. This builds not only consistency but also an appetite to improve efficiency.

 

At that point it’ll be easier to transition to that much needed solution seeking approach. Rather than just paying these monthly or quarterly bills, take the time and effort to dig deeper.  Is this bill comparable to last month’s or to bills from earlier in the year? How does it compare to the previous year? Does the bill provide consumption data? What can I learn from the information I’ve been provided with?

 

You’re looking for any ABNORMAL SPIKES, whether it be in cost or consumption. That spike will tell you something is off, your next step is to figure out what it is.

“Rental properties don’t come with a convenient “check engine light”, but a very close equivalent is mailed to you monthly

 

STEP TWO: INVESTIGATE

If you’ve discovered something that seems out of the ordinary, you’ll want to do something about it; you need to take action. The next step is to inspect the property. If you work with a property management company, request that they send a technician out to learn more. You need to find the source of the irregularity.

 

For example: your water bill was much higher than usual. You or the technician should go to the property and check every sink, washing machine, and spigot for looseness or a leak. If it’s sewer (some municipalities offer separate bills, some combine the two) check every toilet for leaks and faulty hardware.  Check the showers for drips and loose valves that could hint at a leak behind the walls. You know something is wrong and you know it is costing you money.  It will continue to cost you money if it is not addressed. So attack the issue aggressively and fix in a timely fashion.

 

THREE CAUSES OF BILL IRREGULARITY:

In our experience it always comes down to one of three things, all of which need to be dealt with quickly:

 

  1. MECHANICAL FAILURE: All too often the issue is mechanical failure, especially with older properties that are so prevalent in the rental property world.  It is an unfortunate reality that things break but it’s the way of the world. Appliances, pipes, you name it…they all become less reliable with age and in time need to be replaced. The key is catching the failure as early as you can. Smart property owners act when the first signals of a problem arise. Inexperienced owners wait for the problem to run its course.

 

  1. NEGLIGENCE: A property owner or manager is negligent if they ignore those early signals in the interest of saving money in the short term.  We see this all the time and it makes us angry because inevitably it leads to bigger, more costly, issues down the road. Thinking about short term profits is not only foolish, selfish, and coming at the expense of tenants, but also poor management in that it ignores the principles that are essential to long term tenancy.

 

  1. ABUSE: From time to time, tenants will try to beat the system. Being creative with extension cords is not uncommon for tenants who are trying to save money in anyway they can. We’ve seen sharp spikes in consumption after conflicts with property owners that are seemingly out of revenge or an effort to get even (monetarily) for some perceived injustice. Whatever it is, these things happen…and they will continue to happen unless you’ve got your eyes open when that bill comes to your mailbox.

 

EXAMPLE #1 MECHANICAL FAILURE: THE $1800 MIXING VALVE

Mixing valves are found in older buildings, which make up the majority of rental properties out there. Its function is quite simply to blend your cold water with your hot to give you the desired temperature while showering.  Check them out here if you want a visual…they are not complex nor expensive but when they start to fail they need to be addressed quickly because they’re behind walls where you obviously don’t want water.

 

In one of our properties it was apparent there was an issue with the sewer water somewhere based on activite utility bill analysis. What is usually a $200 monthly bill had ballooned to $355 this time around so it was apparent something was wrong. The Nexus maintenance technician found no evidence to justify the increase when checking faucets and other typical sources. He then looked into the mixing valve and found the culprit.  The water was immediately turned off and the repair cost a couple bucks, but the problem was solved.

 

Had this not been caught, or the owner had chosen not to do anything about it, the situation would’ve gotten costly, quickly. At a monthly increase of $155, the owner would’ve been looking at an extra $1,860 for a full year had he not caught this when he did.  NOTE the intentional wording in that sentence…if he hadn’t caught this when he did, a couple months into the problem he easily could’ve accepted that $355 as the norm rather than an outlier. And of course, if we’re talking about calculating costs, we can’t ignore the likely need to repair the interior of the wall and very possibly have to treat for mold.

 

[Learn More: PROPERTY OWNERSHIP STYLE: ARE YOU MORE LIKE AN ACTIVE PARTICIPANT OR A SLUMLORD?]

 

 

EXAMPLE #2 ABUSE: ELECTRIC SPACE HEATERS

In over a decade of managing properties we’ve seen multiple situations where tenants have gotten creative with electric space heaters in an effort to save on their own gas bills. Although gas and electric are usually bills that tenants pay themselves, property owners almost always cover the common area electric. This includes lighting and outlets in stairwells, and on the exterior of the building. Sometimes extension cords are leading out to the hallway. Other times we’ve found them going out the window (even from the second floor) down to exterior sockets. If you’re thinking a regular visual expectation of the property should help defend against this, you’re right. In many cases we’ve helped avoid bill increases because our inspections have revealed this situation early. However, it’s worth noting that many people work during the day (so they’re less likely to be home), and it’s colder at night, so some tenants have taken the added effort of only plugging in after the sun goes down.

 

In a recent example, a 3rd floor was split into two units so they shared an electric meter and therefore the owner paid the electric for both tenants. A bill that is typically between $60-$100 jumped up to $220. Although gas bills jump a bunch in the winter months, it is odd for electric to do so.  After a quick inspection we found that the tenant had plugged in several electric space heaters rather than using the gas unit in the apartment. Not only was this a huge fire safety issue (those heaters work extra hard the colder it gets), it was deceptive and not short of theft.

 

[ Learn More: HOW TO EVICT A TENANT IN RHODE ISLAND ]

[ Learn More: THE RULES: MINIMUM TEMPERATURE REQUIREMENTS FOR RENTAL PROPERTIES ]

 

SUMMARY AND NEXT STEPS:

The common theme in so much of the advice we provide our clients revolves around keeping an eye on the long term. To do so effectively, one must be tuned into the present to ensure all those factors that will compound into profit are taken care of and pointing in the right direction.  Monitoring utilities is a perfect example of an upfront cost (in time) that will save money and create greater profit in the long run.

 

Reach out to our team directly if you have any questions or are interested in learning more about becoming a Nexus Property Management® client. With four offices currently open for business and franchise opportunities nationwide, Nexus is dedicated to Connecting You To Better Living®

 

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 Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.

 

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