You’re out at a restaurant having dinner with several of your friends. The drinks are flowing, the conversation is engaging, and the food couldn’t be better.
It’s a great time until the bill comes. The mood quickly changes as everyone tries to figure out how much money to pony up. Someone suggests splitting the check evenly, but that’s clearly not going over well with the person who only ordered a salad. Your vegetarian friend doesn’t want to pitch in for the table’s calamari, and a few of your friends didn’t drink any of the wine that was ordered for the group. Most likely, someone will leave for the night feeling like they paid for much more than they consumed.
Divvying the utility bill for a multifamily property can be a lot like dining with a large group of friends. How do you determine the best way to allocate the charges? If you’re lucky, your property is equipped with submeters, which will make it easy for you to know how much to charge each unit. However, submeters aren’t feasible at every property, which leads many property managers to use RUBS when allocating resident utilities.
RUBS stands for Ratio Utility Billing System, and is a cost-effective and fair alternative to submeters. RUBS essentially divides a utility bill among your residents based on certain criteria. Different utility types can often influence the type of RUBS formula a property uses.
If you are thinking about billing back for utilities and want to implement RUBS, here are the different calculations to consider.
Occupants per Unit
This calculation evenly splits the utility bill between each occupant in a unit, and is commonly used for water bills. The logic behind this method is, if more people live in a unit, they will consume more of a given utility. For example, a single occupant in a one bedroom unit most likely uses less water than two people in a one bedroom unit.
Property management companies love using this allocation method. It’s a clean split that makes sense to residents, and it solves the problem that the more people that live in a unit consume more.
A difficulty can be figuring out how to adjust the allocation should the occupants per unit increase. For example, if a couple has a new baby, how should their rate be adjusted? Their new addition won’t be using as much as a grown adult. The other challenge is making sure that occupancy totals and data are always updated and accurate within your property management software.
Square Footage of Unit
Some property management companies calculate utility bills based on the square footage of a unit. This method is often used for gas bills. The logic behind this method is that larger the unit, the higher its utility consumption will be.
Larger living spaces often correlate with higher heating/cooling prices. The gas needed to regulate the temperature in a 1,000 square foot unit will be much higher than in a 500 square foot unit.
Before committing to this formula, you should take into consideration each unit’s design. An apartment might be larger, but that does not mean it has more water appliances or occupants as smaller units, thus disproportionately allocating back.
You can also use a calculation that accounts for the unit’s total occupants and the square footage. Most of the time these two are split 50/50 split when generating the utility charge. The logic being: larger units and more occupants will result in higher utility consumption. While it has the benefits of each of the above methods, it also carries the pitfalls.
Adjusting for x-factors is crucial for making a fair allocation. What are examples of x-factors? Perhaps some units are equipped with a washing machine. Maybe you have units with more bathrooms, which will use more water, or units with fireplaces, which use more gas.
To solve for these variables, we simply add in a multiplier to ensure one resident is not paying more than their fair share. We might notice a washing machine uses 30% more water so we assigned it a factor of 1.3x per month.
Picking What’s Right for You
The good news is that there are many ways you can recoup your utility costs with RUBS. If you’re overwhelmed by the options, contact a utility billing expert. They will work with you to determine the best setup for your unique property and if you should apply different calculations for each utility. Regardless of which RUBS method is chosen, the benefits are the same – you’ll recoup more of utility costs, have stronger expense forecasting, and see reduced utility consumption.
So, how will you choose to RUB your residents?