Typical Percentage of Water Leakage

I am estimating income and expenses for a park with public utilities. I figure it must be rare that all water/sewer expenses are recovered when billing back tenants because of leaks in the system.

If water/sewer charges to the park run $100, hypothetically, then what would an average park collect from billing back tenants? $90? - a 10% deduction for water leaks, for example?

–Looking for an accurate estimation.

Thank you

More importantly, you need to take into account the collections loss. It is true that you will take a loss for leaks, but you can take steps to catch these throughout the month and the city will sometimes reimburse for leaks. However, when you takeover a park from Mom and Pop, you will take most of your utility loss from uncollectable accounts. So, match your anticipated collections loss on rent to your utility loss and then factor in a loss for leaks. 10%-20% is usually a good projection early on.

10 % loss would be optimistic. Of course it can vary greatly but I think 30% is more realistic. Depending on your state laws, however, you may be able to charge a billing or admin fee on your water bills and thus recapture some of your losses.

Are you saying 30% loss due to leaks or due to leaks and collections?

Seems kinda high. Anyone else have losses that high?

Water and sewer cost are escalating in all markets, inaccurate usage calculations by the municipal utilities is typical, finding and then repairing leaks is extremely labor intensive.

Water sub-metering each home quickly and proactively finds leaks, wastes, and common area leaks.
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Dan Helton

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Your water/sewer loss should match your collections % loss on rent + leaks. If you plan on cleaning house on this park, then expect to not collect the water billings in addition to the rent. For leaks, that will depend completely on the park. Just for leaks, I think 10% is a reasonable, conservative number to use when making offers where buyer and seller can agree.

Another thing to consider is that it’s somewhat unlikely that all of the meters in the park actually track the usage correctly. For example, if the meters were installed 25 years ago, they may not capture all of the usage and many might not register anything at all. Just food for thought.

The point is, when you look at the utility line items on a P&L and you see the expense as X and the revenue as Y, where Y is much lower. This doesn’t always point to massive leaks. It can be an inaccurate use of a billing variable by the owner, it can be faulty meters, it could be the manager fudging the readings for his or her friends, it could be that the collections are horrid throughout all operations of the park. All present an opportunity, but it is up to you to figure out what the problem really is during diligence.

Last thing, you may also see a slightly higher loss just based on the day the meter is read each month. If the park you are looking at reads on the 4th and bills in the following month’s rent, then your eviction tenants get three free extra weeks of water. If you instead read on the 25th and bill 5 days later, then you cut out those three free weeks. Just doing that can save you a few hundred bucks a year on a 50 space park.

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