Use the water meters, or keep it simple and raise the rent?

Hello all!

We recently purchased a mobile home park that has brand new smart meters installed. Currently, the tenants are using about $45 a month in water/sewer on average. Should we raise the rents up $45 (that would get the park up to current market value) and keep it simple, or start billing back water? I know Frank has the $40 rule for not putting the money into water meters, but they are already there. Is it worth the extra steps to bill back? Thank you for your helpful input!

I would say it is worth the extra steps for two reasons. One is that when people start paying for actual usage, their usage will most likely go down. That is good for their pocket and yours plus the environment.

The second is that you essentially punish the ones who use less water to subsidize the higher users. In my park that would mean that my 85 year old senior citizen on fixed income would have to pay 3 times what she uses to subsidize the family with two wage earners. Not particularly fair.

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@ngrov I would bill back water if your numbers are accurate. It’s good for a number of reasons that @Opfats mentioned. Also, having a rent lower than market isn’t going to hurt your occupancy rate. I’m not sure what it is currently but if it’s under 100% it would make even more sense to bill back water first.

You didn’t mention the state your in. You need to check your state utility commission rules and make sure you understand what your signing up for. Some states actually make you lower your lot rent once you start utility bill back (i.e. lot rent must be decreased by average water bill for first two months). If your in a state that is not to painful it usually is a good idea to bill back for water. One reason not usually discussed is it insulates you from the inevitable rate increases that are coming from your water supplier.

Yes I do meter my park. My water bill went from ~$500 per month (small park) to ~$150 per month. The biggest culprit was running commodes that nobody cared about until it was their money.

My point about fairness is that you mentioned you were increasing rent to take care of the water bill not to get to market rates. That does unfairly punish those who are good with water.

My next “rent increase” will be to move to triple net where the residents pay for water, garbage, taxes. That way I’m more inflation proof than today.

Use the Sub-Water Meters:

  • Based on numerous private and government studies, when tenants’ pay for their own water/sewer usage the usage drops by 25 to 35%.
  • Third party billing service provide the billing at no cost to the owners (most states), tenant pays a reasonable Admin Fee.
  • Water/Sewer expenses are not in the rental equation (rental increases are mitigated)
    We’re here to answer your water submetering questions”

Sincerely,
Dan Helton
President
Southern Water Management
727-827-4509
Dan@SouthernWaterManagement.com

I would immediately bill back water and in about 6 months raise the rents to full market if you think doing both immediately is too much.
Keep in mind why you are in business. It’s always about the money first, it will always be affordable for your tenants compared to their other options. They will adjust to real world costs or move on and you will get better tenants. Better tenants is the upside.

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Let me play devils advocate: There May be liability, and there will certainly be I’ll will, if tenants discover you had meter information but ignored it.

My opinion: Always, always, always use water meters. And then some.