Utility Management: 9 mistakes property managers make

Estimated read time 5 min read

Apartment communities spend a lot on utilities. With inflation driving up the cost of utilities, it is even more crucial to keep these costs to a minimum.

The right utility management strategy will not only keep your costs low, but also present you with the opportunity to generate additional revenue. You need to evaluate every aspect of your utility management program before you can do that. Most companies have some areas they need to improve. These are the most common mistakes apartment operators make that cause them to spend more on utilities than necessary.

Include utilities in your rent

Include utilities in your rent. This is because you’re not recouping enough money to cover your actual costs. Residents don’t get any utility bills, so they have no incentive to save.

It’s also difficult to increase rent and still remain competitive in other apartment communities when utilities are included. Rent prices are now more important than ever because rents have risen so dramatically in the last year. Some renters may be scared off by a “utilities included” model if there are other communities nearby that charge for utilities but have lower rent.

Charging utilities a flat rate is #2

A flat rate is also risky, as utility costs are volatile. Recently, the cost of utilities has only increased. You can’t charge too much, but your fee must be high enough to ensure you don’t lose money. Overcharging utilities can be illegal in some states.

No. 3 Neglecting energy-wasting features and impacting NOI

Your business is negatively affected in two ways when your buildings aren’t energy-efficient. You will use more energy, which means you’ll have higher costs (and a lower NOI).

Renters could be turned off by it. A study by ACEEE found that renters were more willing to pay a bit more for rent if the community advertised energy efficiency. Renters increase their budgets by an average of 1.8% per unit increase in energy score. This would generate $400 in extra revenue per unit for a rental unit priced at the average.

The importance of utility metrics

Monitor data related to utilities. This is a great way to improve the overall utility program. Many multifamily companies do not take advantage of this opportunity.

By not monitoring your utility data actively, you miss opportunities to improve your revenue and reduce expenses. In addition, many states and cities are passing laws that require multifamily buildings report and assess their energy performance annually. Whether you like it or not reviewing utility data has become more important than ever.

#5 Paying your utility bills without auditing it

Most companies check the amount due before making a payment. This can lead to a lot of unneeded charges. According to studies conducted by Engie one of the largest utility billing auditing firms in the country, at least 17% utility invoices have an error. Many invoices that your company receives are likely to contain errors.

It is for this reason that audits of utility bills are important. Utility expense management companies audit your utility bills for errors and potential savings. The provider will dispute the charges until they are resolved.

The #6 way to accumulate and pay late fees each month

The payment period for most utility bills is fairly short. To make matters worse, your utility bills may not arrive at all. This forces your colleagues to search for what is missing.

Due to these two scenarios it is easy to be charged late fees. It’s a shame, as they can add up. Most utility companies charge fees equal to 12-, 18-24-36-percent interest rates. Utility late fees can be steep. They add up quickly. Your NOI depends on timely payment of utility bills.

Renters utilities: #7 How to pay after the move-in

Property management companies can lose thousands of dollars a year due to utility theft. This happens most often because tenants forget to change utilities in their names. This mistake can cost your business thousands of dollars in unpaid charges each year.

You are not monitoring utility regulations in your state.

Each state and each municipality have different rules for handling utilities. If you have a portfolio of communities in various regions, it is important to know the rules that apply in each one.

Infringing on utility regulations may have costly consequences. The majority of states charge fines per incident. Let’s say that you made a small error when billing your 300-unit complex. This is 300 fines, not 1.

The utility bill is not the only thing to consider

Utility management strategies often overlook the importance of how residents pay and receive their utility bills. If you don’t consider how residents feel about the process, you may be damaging your bottom-line.

A bad payment experience in the short-term can lead to late fees and residents who are frustrated, especially if they want more information about their charges.

A poor utility payment system could have a long-term impact on resident retention. If the utility payment process is difficult or residents are not informed about their debt, this can affect resident satisfaction, since it is repeated each month.

Utility management mistakes: How to avoid them

Don’t be alarmed if your business is guilty of any of these errors. You can get back on track with a few simple strategies. Consult a utility provider who specializes in multifamily housing. You can get advice on how to reduce your costs.

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