Apartment Utility Expenses: How to Underwrite Water, Electric, Gas and Trash
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Water and sewer, common area electric, gas and trash add up quickly in an apartment building. In many buildings the owner pays the bills and bills part of the cost back to residents. If you underwrite only the net number, you can miss what happens when a utility raises its rates. This post shows how to underwrite utilities so the number holds up. It is part of our underwriting guides. It is general information, not legal, tax or investment advice.
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Step 1: Know how each utility is metered
| Setup | Who pays the provider | What it means for you |
|---|---|---|
| Master meter | The owner | Owner pays all, may recover part through billing |
| Individual meters | The resident | Owner pays only common areas |
| Submeters | The owner pays the provider, residents pay the owner by reading | Needs a billing process and a legal setup |
Water and sewer is often master metered in older buildings. See ratio utility billing (RUBS) for how owners allocate cost.
Step 2: Get the real bills
Ask for 12 to 24 months of statements from each provider, not just the seller's summary. Look for:
- Billing lags and catch up charges that make one month look odd.
- A recent rate increase not yet reflected in the T12.
- Leaks or high usage that a repair could fix.
- Fees, such as stormwater or trash charges, that arrive in odd months.
Step 3: Underwrite the recovery on its own
Reimbursement depends on lease language, local rules, collection and vacancy. Ask:
- What share of residents actually pays the utility charge?
- Is the charge allowed under the leases and local rules?
- What happens in vacant units, where nobody is billed?
- Can the charge change at renewal only, or sooner?
See other income underwriting.
Step 4: Grow each line separately
Utility rates often move faster than rents. Recoveries move only when leases and billing change. Set the gross cost growth on its own and leave recoveries flat until you have a plan to raise them. See expense growth assumptions.
A hypothetical example
This is an illustration with made up numbers, not a benchmark. A 100 unit building pays $180,000 a year in utilities and recovers $90,000 from residents, so net utilities are $90,000, or $900 a unit.
| Line | Before | After an 8% rate increase |
|---|---|---|
| Gross utility cost | $180,000 | $194,400 |
| Recoveries (no change until renewals) | $90,000 | $90,000 |
| Net utility cost | $90,000 | $104,400 |
Gross cost rose 8%, but net cost rose 16%, because the recovery did not move. That gap hits net operating income and value directly. See net operating income.
Step 5: Look for ways to lower the bill
Low flow fixtures, leak detection, common area lighting upgrades and submetering can reduce cost or raise recoveries. They also cost money up front, so put them in the capital plan. See operating expense ratio and reducing operating expenses.
How DoorRaise fits in
DoorRaise does not pay building utilities. A sponsor sets the underwriting, and DoorRaise handles the raise, the deal company, the investor paperwork and escrow. Sponsors pay a flat $1,500 setup fee and a flat $5,000 yearly administration fee.
Frequently asked questions
Should utilities be one line or two?
Two: gross cost and recoveries. A single net line hides what happens when rates rise.
Do vacant units cost utilities?
Yes. Common areas and some unit utilities continue, and no one is billed back for a vacant unit.
Is submetering always better?
Not always. It needs equipment, a billing process and compliance with local rules. Price it before you count on the savings.
Sources
This article is general information as of November 2026, not legal, tax or investment advice. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.