In the third week of our Multifamily Owner Expenses series we are addressing: Utilities.

For apartment owners, utilities include water, sewer, garbage, gas, electricity, internet, and cable.

Apartment complexes built in the last few decades are typically separately metered for utilities, while older buildings are usually not separately metered. When tenants are responsible for their own gas and electricity, it can eliminate the risk of variability for utility usage. This includes a tenant keeping the windows open when the heat is on or a tenant keeping the lights on long periods of time.

Another item to note is that older buildings with boilers typically cost more to operate. Because of this, we generally underwrite buildings with boilers at a 50% expense ratio instead of a 45% expense ratio.

What apartment complex owners typically pay for:

  • Water
  • Sewer
  • Garbage

What apartment complex tenants typically pay for:

  • Gas
  • Electricity
  • Internet
  • Cable

In the City of Spokane, an average water/sewer/garbage bill is around $97 per month, per unit. If you have a 10 unit apartment complex, this would put your annual utility bill around $11,640. Once you get outside of city limits, you can expect your water/sewer/garbage bill to vary depending on location.

Solutions to improve utility efficiency:

  1. RUBS (Ratio Utility Billing System): A good way for owners to recoup costs of water, sewer, and garbage is to charge tenants a monthly rate for utilities that is separate from rent. This will allow owners to advertise their units for a lower rent which could draw more tenants to their buildings.
    • For example, market rent for a new 2bed/2bath unit in the Spokane Valley is around $1,700 right now. Owners could advertise this unit at $1,600 per plus a $100 per month RUBS charge.
  2. Dumpsters: If you own a good size apartment complex (10+ units), it will likely save you money if you have a dumpster for tenants vs using multiple trash bins. The cost of service for a large trash bin in Spokane is $568/year. If you have multiple trash bins, this cost can add up. The alternative is having one large dumpster and making dump runs on an as needed basis.
  3. Converting Units to Be Separately Metered: If you are planning to hold an apartment complex long term and the building is not separately metered, it would likely be in your best interest to separately meter each unit. The upfront cost may be high, but if you could recoup these costs in 3-5 years to gain a better cash flow moving forward, it would likely be worth it.

Want to learn how we can help you with you business? Reach out today!


SVN Cornerstone Multifamily Team

Nate Gant is an Advisor with SVN Cornerstone. Nate has been an active member of the Eastern Washington real estate community since 2010. He has brokered more than $100 Million in real estate transactions, specializing in land development, REO and investment properties. To get in touch with Nate, email or call 509.993.4440.

Jordan Lester is an Associate Advisor with SVN Cornerstone. Jordan served as a brokers assistant for 3 years with SVN Cornerstone before becoming a full time broker. Jordan specializes in the multifamily sector of commercial real estate. To get in touch with Jordan, email or call 509.496.6922