Water Submetering in Apartment Buildings: Meters, Billing and Underwriting
On this page
Water submetering puts a meter on each unit's water supply and bills tenants for the water they use. It is one way for an owner to pass water costs through. It differs from a ratio utility billing (RUBS) allocation, which splits the building's bill by a formula instead of measuring each unit. Submetering costs capital up front, adds billing work and depends on state and local rules.
This guide explains the trade-offs, how to underwrite the income and the costs and what to check before you add it to a deal.
Raising for an apartment deal? Start free
How does submetering differ from RUBS?
| Topic | Water submetering | RUBS |
|---|---|---|
| How the bill is split | Each unit's measured use | A formula, such as occupants or square feet |
| Up-front cost | Meters and installation | Software or billing setup |
| Tenant fairness | Pays for what they use | Can be disputed when a formula is unfair |
| Billing work | Meter reads, bills and disputes | Allocation and billing |
| Rule risk | State and city billing rules | State and city billing rules |
For the RUBS side, see the ratio utility billing guide.
What does submetering cost?
The cost depends on the number of units, whether plumbing access is simple, the meter type, installation labor, the meter reading system and the billing contract. Get bids that list each item and state whether the price includes ongoing reads and billing. Ask what happens when a meter fails and who pays to replace it.
How does the income work?
Income equals the water the owner can bill, less the water the building pays for, the meter and billing fees and any credits. Tenants who see a fair measured bill are less likely to dispute it. Some leases and some states cap how much can be billed, and some require a disclosure.
A hypothetical example
These figures are made up for illustration. Use your own bids and billing terms.
A 50-unit building pays $60,000 a year for water and sewer. The owner installs submeters at $450 per unit, or $22,500 in total, and signs a billing contract at $4 per unit per month.
The owner pays the $60,000 water bill either way. The change adds the recovery and the new costs.
| Item | Annual amount |
|---|---|
| Water billed to tenants at 85% recovery (made-up share) | $51,000 |
| Billing contract (50 units x $4 x 12) | ($2,400) |
| Meter maintenance reserve (made up) | ($1,000) |
| Net added NOI before the meter cost | about $47,600 |
The $22,500 meter cost is a capital item, so it is amortized in the budget or funded from reserves. The 85% recovery figure is an assumption, and the owner must justify it with the actual bills. If the state limits what can be billed, the benefit shrinks.
What should you check before you count it?
- The lease language on utilities, and whether existing leases allow the change.
- State and city rules on submetering and billing, including disclosure and caps.
- Bids that list the meters, installation, the reads and the billing fees.
- The current water and sewer bills for 12 months, so the baseline is real.
- The plan for disputes, late payments and tenant turnover.
- Whether the change will be treated as a capital project or an operating cost.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units under Rule 506(b) or 506(c). The deal's budget shows the meter cost as a capital item and the billing income as other income, and the projected returns show both. DoorRaise does not give legal advice on utility billing rules. Setup is $1,500 (non-refundable), and the administration fee is $5,000 a year from closing.
Start with a sponsor page or see the fees.
FAQ
Is submetering better than RUBS?
It is more precise, since it measures each unit, but it costs more to install. RUBS costs less up front and carries a formula dispute risk. Pick by the building's pipes, the rules and the budget.
Can I add submeters to an existing building?
Often, but the cost and the access depend on the plumbing. Some leases must be amended first, and some states set rules on mid-lease changes.
Does submetering reduce water use?
It can, because tenants see their use. Savings are an assumption, so count them only if the plan shows how.
Can submeter income be counted on?
No. It depends on the rules, the bills, the lease and collections.
Sources
- Ratio utility billing (RUBS) in apartments, for the allocation method.
- Apartment utility expenses in underwriting, for the water and sewer line in the budget.
- Example figures are hypothetical. No outside rate or state rule is cited here.
This article is general information, not legal, tax or investment advice. Talk to a securities attorney and a CPA about your deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.