RUBS or Metered Billing: Which is Best for Your Property?

Choosing the right billing method, whether it’s rubs or metered billing, plays a huge part in managing utility expenses for your property. No one likes tearing open a utility bill and seeing more zeros than expected!

This dread has even higher stakes for property owners. It negatively impacts NOI and other aspects of your property like maintenance and management costs, property value, and resident satisfaction.

A popular strategy to recoup those costs is to shift the utility billing to the resident. Two of the most popular methods are metered billing and ratio utility billing service (RUBS). But which one is right for your apartment community?

How RUBS Billing and Metered Billing Work

Metered billing, or submetering, is probably the more well-known method of the two.

Defining metered billing (i.e. sub-metering)

Metered billing is considered a fairer way to determine utility costs. With submetering, each unit has a utility meter that detects the apartment unit’s specific usage to determine how much the resident should pay.

The meter is called a “submeter” because it’s only measuring usage for a specific area or reason, such as within a common area or apartment.

What exactly is RUBS?

RUBS, or ratio utility billing solution, is often used when submetering isn’t an option. It’s a type of mathematical allocation billing.This means the amount each tenant pays based on their apartment complex, or section of the complex’s usage.

Here’s how RUBS billing works:

• One or more large meters monitor the use of utilities at a property.
• The utility company bills the property, and the property divides the costs among the residents.
• Each unit is responsible for paying a fraction of the total cost which is calculated based on factors such as the size of the unit and/or the number of occupants.

With RUBS billing, the property decides which factors to use to fairly calculate how much a unit owes.

A third alternative (not recommended)

A common alternative to these options is charging residents a flat fee for utilities. While this is a simple approach for the property, it could negatively impact NOI.

Flat fees remove the incentive for residents to pay attention to their utility use, which could cause them to use more of the utility or become careless. This can lead you, the property owner footing the bill on the cost difference between actual usage and what tenants pay.  Also, flat fees will not address either fluctuation in usage, utility prices, or tax variations unless the property stays on top of these changes.

Which is better: Submetering or RUBS?

Both RUBS billing and submetering are two good options for reallocating utility expenses. Both depend on the needs of your property and your priorities. Let’s compare the pros and cons of each to determine which one would help you to better manage utility costs for your property.

Pros of submetering (often referred to as metered-billing) include:

• Eliminates all the work – All the utility data is collected digitally and requires no work on the property’s part after installation. Usage data can be converted into bills according to local regulations.  Utility-related issues can be delegated from the property manager to the billing company.
• The tenant pays for what they use—It’s an accurate billing process that lets tenants control their usage and costs. As a result, they’ll have full control of their utility usage costs. With metered systems, the residents pay for the utility they consume.
• The ability to troubleshoot and detect leaks—If there’s a sudden jump in cost, you can look at the submeter that collects data over time. This data can help detect issues such as leaks or maintenance issues like toilet flappers so you can repair them quickly. It can also detect leaks or running water in vacant apartments.  Usage can be monitored daily to detect isolated leaks.
• Increased NOI and property value—The addition of improved infrastructure like submetering systems adds value to your property.
• One Solution – Once the digital network is established, other utilities and sensor data like “Leak Alerts” or noise sensors can be collected and reported.
• Conservation – Paying for your usage will help residents control their consumption and conserve. This puts the resident more directly in control of their utility costs.
• More competitive rents – Utility billing whether metered or RUBS, separates utilities from rent. This should lower the properties costs/NOI and allow you to offer more competitive base rent rates.

The drawbacks of submetering include:

• It requires an up-front investment—The technology is added to your plumbing system. The system is a capital investment that can be applied in construction financing, or as a property improvement
• Non-compatibility with systems—Some buildings with older plumbing systems can’t support submeter installation.
• Maintenance – like all building systems, upkeep and maintenance are required.

Pros of ratio utility billing service (RUBS billing) include:

• No installation–Since RUBS only uses the existing municipal utility meter data, this method is quick and easy to set up for properties. RUBS billing does not require up front capital or installation to get started.
• Standardized utility costs—Since tenants are more likely to take smarter measures to decrease costs (such as conserving water, reporting maintenance issues quickly, and minimizing waste), utility bills will be more consistent each month. Plus, the costs will go to the tenants who consume the utility.
• Increased NOI—Using RUBS billing separates the cost of utilities from rent for residents which provides a buffer so that you’re not paying for spikes in the monthly utility costs.
• One solution—RUBS billing can be used for all tenant utilities, creating an even simpler billing process.

The drawbacks of RUBS billing include:

• Less alignment to individual resident consumption—Monthly usage calculations are based on the usage by the community, not individual units. Residents using disparate amounts of utilities can cause frustration among residents who may not be using as much as others are.
• Lack of historical data—Unlike with submetering, each tenant’s usage data isn’t recorded, so it’s more difficult to help the resident understand their usage patterns and history.
• Significant changes in usage cannot be detected quickly – Since usage is based on the monthly master bill, any usage abnormalities can only be determined after the receipt of the monthly bill. This timeframe isn’t usually very helpful in addressing time-sensitive maintenance issues.
• RUBS Billing is not always legal – Some municipalities prohibit the use of RUBS billing in favor of metered billing. You’ll want to check local rules and regulations to determine if RUBS billing is even an option for your community.

Choosing the Best Utility Billing Method

When deciding on your utility billing method, consider:

• What is best for your property?
• What aligns with your objectives?
• Do you want to strictly reallocate utilities to the residents?
• Do you want to conserve a valuable resource?

If you’re looking for an accurate system that provides maintenance feedback and has minimal resident controversy, then metering is your best approach. If you’re looking for “good enough,” then RUBS may be the solution.

If you need a solution up and running quickly, then RUBS billing is the better option. There’s less technology and setup required, but RUBS will not allow quick feedback to catch leaks or excessively high use due to a running appliance.

Another factor to consider is budget.

Metering systems do have capital costs to purchase and install the meters. These expenses have payback within 12 to 36 months.  Also, there is intrinsic value created by the addition of a metering system/network. RUBS billing wins here as well since it’s a more affordable option. It also saves you expenses since it’s more likely to protect against spikes in billing from tenant utility use.

Note: Both will reveal spikes…however, meters will pinpoint the high users whereas RUBS will be relegated to a building or group of residents having spikes in usage.

If accuracy is most important, submetering is the best route to take (covered above).

Accuracy will matter most to residents, so submetering can be the better option for keeping everyone happy. It will also allow them to track their usage, notice inconsistencies in their billing, and work with maintenance to repair issues, putting them in the driver seat of their utilities use.

Bringing in Third-Party Utility Billing Service

Working with a third-party provider for billing services takes the responsibility off your team. They shouldn’t have to worry about calculating usage, auditing master utility bills for errors or issues, keeping resident utility records, billing tenants, and more. Third-party billing providers can help with customer support when an issue arises – regardless of the method you choose. They also provide an end-to-end solution so that your team can focus on offering a great living experience for residents.