9 Mistakes Property Managers Make with Utility Management

November 7, 2022


Rent Manager

Person reviewing bill

Utilities are one of the greatest expenses for multifamily communities. With inflation increasing utility costs to record-high amounts, it’s even more important for property managers to keep these expenses to a minimum. Here are the most common mistakes that result in property managers spending more than they should on utilities.  

Including utilities in the price of rent

Rolling utility costs into the price of rent can be a BIG mistake, since you aren’t recouping money equal to your actual expenses. Also, residents don’t receive a utility bill, which doesn’t motivate them to conserve. 

Charging a flat fee for utilities

Charging a flat fee for utilities is risky since costs fluctuate. The fee must be high enough so you aren’t losing money, but you also can’t overcharge because in some states it’s illegal to do so. 

Neglecting features that waste energy and impact NOI

When your buildings aren’t energy efficient, it hurts your business in two ways. First, your property uses more energy, which ultimately results in higher expenses and lower net operating income (NOI). 

And second, neglecting obvious efficiency upgrades could detract renters. An ACEEE study found that prospects were more likely to visit communities that advertised energy efficiency, and were willing to spend a little more on rent at those properties. On average, renters would increase their budget by 1.8% for a one-unit increase in energy score (on a scale from 1 to 10). That increase generates $400 per unit in additional annual revenue for an average-priced rental unit.

Overlooking important utility metrics

Monitoring utility data is one of the most effective ways to improve your overall utility program. Unfortunately, many multifamily companies don’t monitor these metrics at all. 

By not actively monitoring utility data, you are missing opportunities to reduce expenses and improve revenue. In addition, many cities and states are enacting laws requiring owners of investment properties to annually assess and report energy performance. Reviewing utility data is now more important than ever.

Paying utility bills without auditing them

Many companies only check the balance due on an invoice before issuing a payment. That strategy can result in paying many unnecessary charges. According to studies conducted by ENGIE Impact—one of the nation’s largest utility billing auditors—at least 17% of utility invoices contain an error.

This is why utility billing audits are so important. With the help of a utility expense management company, your utility bills are audited for errors and savings opportunities. When mistakes are identified, the company disputes the charges on your behalf until a resolution is achieved. 

Accumulating and paying late fees every month

Most utility invoices have a fairly short payment window. To further complicate things, sometimes invoices don’t arrive at all, forcing your associates to track down missing information.

These two scenarios make it very easy for late fees to accumulate. Many utility companies assess fees equal to a 12%, 18%, 24%, or 36% annual interest rate. Simply put, utility late fees are expensive and it’s vital to your NOI that invoices are always paid on time.

Paying for renters’ utilities after they move in

Utility theft can cost property management companies thousands of dollars each year. Most of the time, this happens because renters forget to transfer utilities into their name. Whatever the reason, this error can cost your company big time. 

Failing to monitor utility regulations for your states

States and municipalities have different rules regarding utilities. Therefore, if you operate in different regions, it’s essential to see what rules apply to each community in your portfolio.

The consequences for violating utility regulations can be costly. Most states charge fines on a per-instance basis. For example, if you make a minor error in billing a 300-unit community, that will result in 300 separate fines!  

Overlooking the utility payment experience

If you aren’t considering the utility-payment process from a resident’s perspective, you could be damaging your bottom line.

In the short term, a poor payment experience can lead to late payments and frustrated renters, particularly if they need more clarity about charges. And in the long run, the process could impact resident retention.

When the payment process is inconvenient, or renters don’t feel well-informed about what they owe, it impacts their satisfaction with your property. 

If your company is making any of these mistakes, don’t worry—Zego’s latest ebook, Common Utility Management Mistakes and How to Fix Them can help. Download your free copy now!

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