Saving Money?
I working on a deal for 18 units and I am having a problem making the numbers work for a positive cash flow. Landlord pays heat, hot water and and all gas related apps. The bills from UGi are equaling abot 18000 per year killing any cash flow at the asking price. I was wondering if switching all the units from Gas stoves to electric could save enough to warrant their cost? I believe not ,as the summer bills only equal about 600 per month and the cold months go about 3000. I would like to here if anyone has had experience with this. Also I believe(I am seeing the units monday) that there isn't a way to control the temp from one location. Is that easy to take care of?
Bri
Wondering if we could see all the numbers. You will get a lot more help from guys here if you were to do so.
I'll run down and get the papers and post in few
Bri
18 units at $310,000
76500 rental income
$17820 fuel cost ( heat,hot water, stoves)
water, sewer,trash removal $12960
$9000 tax
electric (common areas only) $720
No thoughts?
I agreee your gas bills (25% of total rental income) are way too high a percentage of rent, but not unreasonable fro an 18 unit building.
It is very easy to control the heat from 1 single location - move the thermostat - and only have 1 thermsotat.
So your average gross rent is $350 per unit , is there a vacancy factor built into this? are these all 1 br units? Do you realize the gas cost is $83 per unit?
you won;t save anything switching to electric ranges, but you certainly should be able to find a way to cut your total gas bill, either through energy efficient windows, disabiling individual thermostats in each unit, reducing the maximum temperature to something like 70 degrees and allowing unit heaters in each apartment.
Without knowing the configuration of the units, it's a little hard to give any more recomendations, but at the cost per unit you are paying, i would definately try to find a way to get this to cash flow.
The reason I suggested Electric ranges is Tenents pay elec except common areas i.e. hall ways front of bldg etc. It frustrates me because for 18 units @ 305000 I can only come up with about 250 per month positive cash flow
Oh I factored in 5 % vacancy rate.
Bri[ Edited by Brill on Date 08/01/2004 ]
Brill,
I had the same problem with one of my buildings last year. The problem was the tenant kept the temp up way to high and it was MORE than doubling my bill. I went down, put a lock on the thermostat and set it for 69 degrees and the bills are alot better.
Good Luck,
Jeff
From your own numbers it appears that the bulk of you energy cost is in heating and not cooking. You can probably find statistics to compare with a little effort on the internet. I doubt that the savings will be very significant.
I have a shared utility (water) in one of my properties and the tenants split the cost. Maybe you could ammend the lease agreements to phase in tenant participation in some of the energy costs. Your ability to do this will likely depend on the rental demand in your area. Perhaps you could get an "energy credit" from the seller to help with energy costs during transition.
Are you planning on pushing up the rents slightly after you purchase? This may help offset some expense.
I'm curious if those of you that have tried to get tenants to participate in the heat bill, how did it go for you. What specifically did you do and how did you enforce payment. I have a 3 flat where the 2 & 3rd floor are on the same boiler. So one bill. The 1st unit pays their own. Other than the expense of splitting a hotwater heating system. what would you recommend. BTW, I'm in the Chicago area, not known for it's mild winters. with the price of oil at $44 and gas already projected to be 18% higher based on today's price. what would be the best way to approach this ?
[addsig]
1) Cut the system off so it only works for the second floor and install baseboard heaters
2) Increase rent if it is not enough. This is what I'd do. Find out what a similar property goes for when they pay their own heating, then figure your average heating bill over 12 months, and add it to that rent...
Interesting idea. Is baseboard very expensive both to purchase and for monthly cost of heat ? I assume it is electric and expensive.. Thanks.
[addsig]
Do you know if there is anyway or a formula for estimating cost of heating an area with baseboard as compared to the boiler ? I was thinking maybe I should put in a second boiler but that is big $. I do like the baseboard idea. Maybe I can get that info at Home Depot.
[addsig]
i assume you are operating on a system that supplies all 3 and can't have seperate meters. you can split the bill{s} by taking the sq.ft. of each flat and dividing it into the total to get a % and bill them accordingly. to enforce put in as part of the lease agreement. example total sq.ft. 3000, flat 1 1500sq.ft. equals 50% of total sq.ft. pays 50% of total bill, flat 2 has 750 sq.ft. equals 25% of total sq.ft. pays 25% of total bill, you get the idea. seperate metering is the most accurate and you recieve the less complains about......kenmax
SO I assume I would send them a bill every month. And it would be due the following month. This could get tricky as if one paid and the other didn't I'd be the one with the liability. Unfortunately I can't seperate one boiler. While i like the baseboard idea, I think it would be a turn-off to a renter. Hooking up a second boiler would be big $, I assume.
[addsig]
I wouldn't try to allocate the bill...If somebody uses a disproporionate amount of the utilities (ie always cooks at home, is always home with the lights on, has three TVs running all day, his computer, fax,, stereo, etc. and the other tenant is a guy that is only there on the weekends because of his job...and uses nothing near the bill...just sounds like a problem waiting to happen, plus the billing/collecting issues...I don't know of a cost estimate. When I was in college I had an apartment that was heated with baseboard heat, I didn't notice any difference versus the other apartments I had (for utility bills in the winter).
if they don't pay the bill they won't pay the rent it 's not the method of payment it's the payee. do you have an action to take if they don't pay the rent? you can do the same thing if they don't pay util. bills.....kenmax
Thanks for the ideas. The baseboard sounds interesting. Of course, I have to see if I'd lose my tenants. (LOL)
I was looking to increase my rents 5% which would help offset the higher heating bills. However, I would really rather just get tenants to pay it.
seperating the heat with a new boiler would be big $ so the baseboard would be the best idea so far.
[addsig]
I never said the only issue was them not paying. I meant, your going to have to send them either an itemized bill or a seperate bill for utilities, that will vary each month, and then someone will say "I didn't use that much, it must have been the other guy, this bill isn't fair and I'm not going to pay it..." and you get yourself into a real mess.
One of my tenants are Sect 8, the tenants have been long term but I just bought the bld'g. So I don't have a relationship with them yet. I might just go through this winter with them and just go for a rent increase which BTW is to market rent and then see about a heating solutiion for next year. Change can be very unsettling to tenants so this might be a big step for them AND risky for me as the new owner to do this coming in the door. Also, our rental mkt is soft right now but stable.
[addsig]
and as i stated earlier it the only way is buy % or some like kind unless you meter and that was not possible with this system i also said "there will be complaints" that's not the best, as i said earlier metering is. any method you use other than metering is going to invite complaints but if you put it in you're lease agreement and explain the method and they sign and agree you will have no problems because they agreed........either way you go.......good luck....kenmax
Thanks to all for your suggestions.
[addsig]