Canada’s inflation rate jumped unexpectedly in April, rising to 4.4%. As well, living and utility costs continue to rise and everyone is feeling the pinch. Property owners, property managers and tenants are all looking for ways to keep more money in their wallets at the end of every month.
Keeping on top of utility payments can be a huge hassle. Each company -- telephone, water, heat etc. has its own payment portal. For property owners and managers (as well as tenants!) this adds up to a lot of time wasted logging in and out of each one.
There are numerous ways to minimize what’s being used in your building and what your out-of-pocket expenses are, ultimately leading to better margins. But before we go any further, let’s review the three most common utility scenarios for property managers.
Three Utility Scenarios
As you draw up your lease agreement, you’ll have to stipulate who will pay utilities. Typically there are three scenarios for utilities. These are:
1. Utilities are Included in the Rent
Many tenants love the predictability of utilities such as electricity and heat being included in the monthly rent. It means there’s no guesswork and no surprise bills. For property managers, this means getting the balance right between raising the rent enough to cover all utilities (even for those tenants who love to crack open a window in the winter and crank up the heat inside!) and yet not charging too much. Using sub-metering systems will help you track exactly how much energy and water tenants are using.
On the plus side, it means that all of the bills come directly to you, making it easier to keep track of all utility costs. This way you can make sure that bills are paid in full and on time. If the rent includes utilities, be sure to spell out which utilities are included in any ads you are running. Prospects often perceive rent that includes utilities to be a better deal.
2. Utilities are Paid by the Resident
Some owners prefer that the tenant pick up the cost of the utilities, and there are many benefits to this approach. It means that you can keep your rents competitive and don’t have the hassle of making payments. However, occasionally tenants will forget to pay utility bills, or, in some cases, skip out on paying them altogether after moving out of the apartment unit. Unfortunately, many utility companies will ultimately hold you responsible for paying the bill.
3. A Utility Fee is Charged
If you opt not to include utilities in the rent, you can always charge a monthly utility fee instead. When you do this, the utility bills come to you, so you have more control. Many owners choose to charge a flat rate per utility, but you can also base the cost of utilities per month on usage. If you choose to charge a utility fee, the lease should cover exactly how much that fee is and what it covers.
5 Ways to Improve Utility Processes and Costs
Here are some proven methods to bring down costs associated with utilities or administration time and labour.
1. Benchmark Your Costs
The first step for keeping utility costs in check is to routinely measure your buildings’ usage. Regularly measuring, monitoring, and analyzing your buildings’ utility usage is a foundational practice for asset management. You’ll want to evaluate how energy and water usage changes throughout the year and year-over-year at the property level and portfolio level, as well as keep an eye out for which properties are most and least efficient.
Once you establish which properties are the least efficient you can start to plan out a strategy to prioritize heating, water and lighting retrofits to cut costs and save money over the long run. If you pay for utilities, consider submetering and charging residents directly instead. Numerous studies have shown that when utilities are included, tenants tend to crank up the heat or blast the air conditioning more freely.
2. Optimize the Process
Property management companies often struggle to streamline the process of payments. Without a built-in outbound payment functionality, employees spend an average of an additional seven minutes per transaction when they send payments via banking platforms or paper cheques. By using an outbound payment solution, you’ll free up employee time, save money and take the hassle out of paying utility bills and other operating costs.
For example, Property Vista's clients can now save up to 50 hours and between $1000 to $3000 in processing payments monthly. On top of its existing rent and fee collection function, Vista Pay will now include the outbound payment feature that enables property managers to send payments securely to multiple vendors and owner distributions instantly and directly from the Property Vista platform.
3. Collect Rent and Any Utility Fees More Easily
To keep cash flow flowing, you need to collect the rent roll on time every month. A payment portal for tenants makes it much easier for both the tenant and property managers. Your residents simply sign up, and can arrange for the rent to be paid through a bank transaction or credit card. On-time payments support better cash flow as residents make one payment for all charges, including any utility fees that you apply to their account.
4. Educate Residents
Whether your tenants pay their utilities directly or utilities are included in the rent, the best way to optimize and lower costs is to educate your residents to conserve energy and other utilities. Include monthly tips in your newsletter, community message broadcasts, or monthly rent receipt. Simple pointers like switching to LED lights, only running dishwashers when they are fully loaded and unplugging electronics that are not in use to prevent phantom energy waste can all go a long way in reducing costs.
5. Think Prevention
Switch to a preventative maintenance mindset. By performing routine inspections and having a preventative maintenance schedule in place, you can vastly cut back on costs. Ongoing, regular assessments help detect things like leaks, mould, and HVAC systems that aren’t up to snuff.
By leveraging a maintenance and inspection tool, like our Inspector App, you can conduct and track inspections on any mobile device. It makes it a snap to take images, record inspection information, alert tenants, capture signatures and keep data integrated.
Most importantly this system of early fault detection helps to make maintenance easier and more efficient. It allows your maintenance staff to prioritize their work and fix issues before they turn into more complex and costly problems.. Being able to fix things as you go saves you thousands of dollars per year.
How Property Vista Helps
With rising costs and the current economic conditions, it’s time to develop your strategy for minimizing utility expenses. To learn more about what you can do to streamline processes and become more profitable through automation and other technology solutions, book a demo with us today!