Surprisingly, rental water bills each month can take a good dent out of the profitability of your rental property. If you are making $200-400/month in profit after your mortgage, a $150 water bill can be a bit painful. At Rental Management Guys, we own many rental properties ourselves and so we feel that pain. Here is how we have chosen to attack the issue:
Monitor your water bill
Don’t just pay those rental water bills without paying attention to them! What should the range of a water bill be? I typically use $75-100/month per unit if that bill includes garbage like in Minneapolis. If you are just paying water and sewer, then your bill should be around $50-60 per month per unit. So what if your bill is more like $150/month/unit? Get yourself into that property and see if there are any faucets or toilets that are dripping or running on. This can add up each month and get worse very quickly. Have me tell you the story of my $700 water bill for one month on a property in Minneapolis (toilet was running constantly). Fix toilets (the flapper costs $5). Replace faucets ($25) and if possible replace shower heads with low water usage ($8).
Shift the expense to the tenants
Where possible, especially in Minneapolis rentals, we have been shifting the water bill to the tenants to pay. We have kept our rent steady, but required them to pay it along with heat and electricity. This shifts usage to the tenants where it should be. Obviously this is easiest in single family homes. I have seen multi-family owners charge a flat water fee to each unit and while it offsets the cost of water, I think it sets up the tenant to think they have paid for unlimited use. There are some communities that will not allow the tenants to put the bill in their name (such as Crystal, Bloomington, Mound). Here you may need to still put in the lease that the tenant is responsible for water, but back charge the tenant as you receive the bills.
Install coin operated machines in multi-family buildings
To discourage extra family and friends from coming over and using your water and machines, you can install coin operated machines. This income stream will also help offset the cost of both the machine, but water and power usage as well. We have been renting units for as cheap as $18/month/machine where the leasing company collects the money and services the machine. We get a 70-80% cut of the income after the lease payment. Makes it almost free to have the machines and removes the burden of maintenance.
Next time you have a chance, take a look at your water bill for your rental property. Is there an opportunity for you to eliminate or at least reduce that cost and put more money in your pocket?