Money MeterEase blog
How to figure your utility cost per unit
If you pay a building’s utilities, you need one number before you can make good decisions about rent, a flat utility fee or a bill-back: what utilities actually cost you per unit, per month. It is easy to know last month’s total without knowing the yearly average per unit. This post shows how to figure it from bills you already have.
Example numbers in this post are made up to show the math. This is general information, not legal or tax advice.
Step 1: Gather 12 months of bills
Pull the last 12 months of each utility you pay for the building: water and sewer, trash, gas, electric. A full year matters because utilities are seasonal. Summer irrigation, winter heating and holiday guests all show up in different months. If you only have a few months, say so when you use the number.
Leave out late fees, deposits and past-due amounts. You want the cost of service, not the cost of paying late. Our explainer on how to read a master water bill covers which lines to look at.
Step 2: Add it up and divide
Example: a six-unit building.
| Utility | 12-month total |
|---|---|
| Water and sewer | $6,480 |
| Trash | $1,440 |
| Common-area electric | $720 |
| Total | $8,640 |
- Per month: $8,640 ÷ 12 = $720
- Per unit per month: $720 ÷ 6 = $120
That $120 is an average. A large unit with more people likely uses more than a studio, and some months are higher than others.
Step 3: Look at the range, not just the average
Note your highest and lowest month. In this example, suppose the lowest water and sewer month was $410 and the highest was $760. If you set a flat fee or a rent number off the average, the high months are where you lose money, and the low months are where tenants may feel overcharged. Our post on ratio billing vs flat utility fees covers who carries that risk under each approach.
Step 4: Split out what you would keep anyway
Some costs you would probably keep even with a bill-back, such as common-area electric or irrigation. Separate those. In the example, $720 a year is common-area electric, so the amount that could be billed back is $8,640 − $720 = $7,920, or $110 per unit per month on average. Our post on who pays for common-area utilities covers the choices.
Step 5: Use the number
If utilities are included in rent, the per-unit cost tells you how much of your rent is really utilities. Track it yearly. If water rates rise and rent does not, your margin shrinks. Our page on utilities included in rent walks through the trade-offs.
If you are thinking about a flat fee, the average and the range tell you how much risk you keep. A fee at the average leaves you exposed in high months.
If you are thinking about a bill-back, the per-unit cost is a starting estimate of what you could recover, before vacancies and the time it takes. The 4-unit recovery post walks through that estimate, and the RUBS calculator shows how one month’s bill would split by square footage or occupants.
Step 6: Repeat once a year
Redo the math each year, ideally before renewals. Rate changes, new tenants and repairs all change the number. Keeping the bills organized makes this a short job; see how to keep records for utility bill-backs.
Check the rules before you bill
If you decide to start billing back, check your lease and your state’s rules first. Our state guides and before you bill checklist are a starting point.
MeterEase splits each master bill by your method and emails each tenant their share with the math and the bill attached, after you review it, unless you turn on auto-send for a property. Plans start at $14 a month; see pricing.
Split the bill and email every tenant in minutes
MeterEase reads the master bill PDF, applies your method and vacancy rule, and emails each tenant their share with the math shown and the source bill attached, after you check the numbers, unless you turn on auto-send for a property. Plans start at $14/month.
Related
- Utilities included in rent vs billed separately
- Ratio billing vs flat utility fees
- How much can bill-backs recover on a 4-unit building?
- Free RUBS calculator
- How to keep records for utility bill-backs
- How to read a master water bill before you split it
- How to split a utility bill that covers two or three months
- All blog posts