Living in Los Angeles there are times when we experience droughts, and supplying water to your tenants can expensive. So, I called three companies to find out what the process of sub-metering a duplex was and how much it cost.
Can you submeter a duplex? Yes, sub-metering duplexes is quite common. The process consists of hiring a utility metering company to install and record the usage of water, gas, or electricity. The third-party company monitors the meters and charges the renter for the exact usage.
This process of saving money on my utility bills has been a journey. I’ve gained a lot of knowledge along the way. If you’re interested in learning how to separate utilities, continue reading and find out what I’ve learned from the utility metering companies.
Why Could Sharing a Duplex Water Meter Become a Problem
The first time I moved out, I remember the utilities being included with the monthly rent. The fact that I wasn’t directly paying for any utilities caused me to be more wasteful. After I became a homeowner my entire mindset of over-using utilities began to change.
According to the Environmental Protection Agency the Average family waste 180 gallons of water per week, or 9,400 gallons of water annually from household leaks alone.
House-hacking a duplex, living in one unit and renting out the other presents incredible opportunity to decrease your monthly expenses. However, many smaller residential multifamily buildings were built with shared utility meters.
Not only can shared meters decrease your return on investment; the renters could be overusing water just by the mere nature of not being entitled to pay for it.
I’m sure if a California drought was occurring it would cause you the homeowner possibly cut your showering time and limit the washing of your vehicles and reduce the watering of the grass.
Well, I’ve seen my renters on several occasions washing cars, filling up fish tanks ectara; and not even paying a mine to water conservation.
So, the problems arise when our renters aren’t conscious of their water usage. They have no idea of how much water they’re using, and the price of the usage.
Solutions to The Problem
Real estate investing can be viewed as an art, there are so many methods and strategies you can implement, that will help you decrease your overall operating expenses.
Three methods commonly used to offset water usage in a duplex
- Fractional paying
- Passing the cost through to the tenants
- Sub-metering additional units
Fractional Payments
Submetering a unit can be costly at times, so many landlords tend to bill the renters directly for a fraction of the water bill.
For instance, a friend of mine owns a duplex and the water bill is in his name. Instead of him paying the bill and eating the cost, he gives the renters the bill; and since both units are of equal size, they split it down the middle.
Although there’re are multiple ways in which the bill can be split, with this method you’ll never know exactly how much each tenant is paying, it could be unfair if one tenant is using more than the other.
Passing the cost through to the tenants
This is another low-cost approach to sub-metering a duplex. The water bill can be passed on to the tenants through their monthly rent payments. This way it removes any discrepancies with the renters on who’s using the most water.
Instead, the renters view it as part of their normal rent payment. One of my properties is three units and this is the method I use, so far I’ve had no complaints.
Sub metering additional units
Sub-metering a duplex involves adding an additional water metering device to the un-metered unit. The device will require a permit and a licensed plumber to install. There are many third-party companies that perform the install and monitoring for a small fee.
This is by far the most expensive route to go when it comes to charging your tenants for water. But it reassures you and the tenants that the water is being measured accurately and the renters are being charged according to their usage.
Why Is Sub-metering a Duplex The Way To Go?
Out of all the methods mentioned above, sub-metering a duplex is on the top of my list. Within a couple of years, the additional money saved would pay for your initial investment of the meter. It also gives your renters a peach of mind that they aren’t paying for the neighbor’s extra use of water.
Points that you should consider are whether or not the installation of the meter would be beneficial for your property long term. If you plan on selling the property in the next 5 years; it may not be the best route for you. However, if you plan on keeping the property past your breakeven point, then it could be an overall good investment.
I Called 3 Companies Here’s What I Found
I called several companies to gather more information on the topic.
Sadly, the majority of companies only focus on apartment buildings, condominiums, and townhomes.
I was able to get through to a few smaller companies and they gave me a break down of how the process works.
- Purchase the meter through the company, and they’ll perform the install.
- The third-party company begins billing the tenant for water usage and charging at the current cities rate.
- Either the tenant can pay you or the company for the water bill.
- Each unit that is being metered is charged a flat servicing fee.
- All of this comes up to a price of 2,000 – 4,000.
The system is very similar to implementing Ratio utility billing(ROI) on an apartment building. The reason the company charges a service fee is because the usage amount is recorded and sent back via WIFI. The meter can also be installed by a licensed plumber and read manually. But this can be physically reading the meter monthly and calculating the current price and water usage.
Related Questions
Sub-meter installation process
The installation process involves splicing the meter directly into the main water inlet of the un-metered unit. In addition to the water connections, there are power wires as well. These wires need to be connected to a power source, allowing the meter to measure the water as it passes through. The install is not difficult but it does require a city permit and a licensed plumber to install.
In Summary
Every situation is different there are a lot of variables. They may affect your choice of which water payment structure works best for your application. Factors such as location, property layout, and long-term goals, will play a role in whether or not sub-metering is the best idea for your smaller multi-family residence.
The cost-effective approach is a good tool to use when trying to decide if sub-metering is effective. In laymen’s terms if you plan to keep the property for at least 5 years, then the cost of the metering unit will be covered, and you’ll be able to start seeing the savings on the water bill.
All in all, billing your renters is a great way to increase ROI, and help the environment in the process. So, whichever method best benefits you, plan it, implement and execute.