|
The Benefits of Submetering
Utility costs are some of the largest operating expenses apartment owners face. Installing utility submeters in individual apartment units in order to pass on utility costs to residents is an investment that must be explored, as the initial expense is not burdensome, the pay off is rapid, the financial benefits are ongoing and property values typically increase.
Because of its financial and environmental benefits, submetering is a growing trend, not only among multifamily owners, but also among industrial and office real estate companies.
Here is an example of how to calculate your financial benefits:
New Construction:
Taking a typical 250 unit apartment property with an estimated average monthly water bill of $25 per unit. Assuming an installation cost of $140* per unit.
* $140 per unit is an average cost for new construction projects; your cost may be higher or lower depending on your project. Retrofitting existing projects will be higher due to the extra plumbing requirements. Please contact a Delta representative to get a quote for your project, new or retrofit.
Initial Investment (number of units x per unit cost)
250 x $140 = $35,000
Monthly Increase in Revenue (number of units x per unit utility cost)
250 x $25 = $6,250
Payback Period (total investment ÷ monthly increase in revenue)
$35,000 ÷ $6,250 = 5.6 months
In this example it only takes a little over 5 ½ months to recoup the costs to install the submeter system, but that's not all. Look at the residual financial benefits of submetering!
Increase in Revenue Per Year - once the payback period is complete - (monthly increase in revenue x 12 months a year)
$6,250 x 12 = $75,000
INCREASE YOUR PROPERTY VALUE!!
That's right, the increase in revenue increases the value of your property. Let's assume a 9% discount rate and see what that does to our property value:
Increased Value (increase in revenue per year ÷ discount rate)
$75,000 ÷ .09 = $833,333
|
