Financial Case & Calculator for AMR Submetering

BP Property is a best practice fictional rental property complex implementing a submetering solution for water. Because SpeedRead wants property managers to be comfortably assured in valuing our solution, we have attached Financial Value Calculators for your use in evaluating an AMR submetering for your specific property.

 Related Excel Spreadsheets for Download

  [Brief Financial Value Calculator (Excel)]

  [Detailed Financial Value Calculator (Excel)]

BP Property has 100 rental units and is operating at 90% occupancy. They expect little change in occupancy for next year. Last year, their water bill was $35,000, 80% of which was directly attributable to tenant consumption. On average, each tenant used $25.93 of water per month while common property maintenance consumed $583.33 per month.

While BP Property has increased rents at 3% per year, they have noticed that the cost of water per gallon has been increasing by 8% per year. If water consumption didn’t change, management expected the water bill would increase to $37,800 in the next year. BP Property knew that they were caught in a trap of decreasing profitability if the trend continued and needed to find a solution. They chose to consider AMR submetering to recover the cost of water from tenants.

With AMR submetering, they would begin to bill tenants according to actual consumption. Management knew that once tenants began to pay for water, their consumption would decrease. Management also knew that AMR submetering would help to locate hard to find leaks. By encouraging conservation through billing tenants for water and by patching leaks through identifying high usage units, management suspected that water usage in the rental units would decrease 40%. (Management had heard that other properties have decreased consumption between 20% and 60% but settled upon 40% as the expected outcome.) Water usage by the common property area might also decrease, but management suspected that this would be minimal.

Based upon these facts and a detailed calculation, BP Property anticipated that the AMR submetering would improve annual profitability by $30,240. $12,096 of the improved cash flow would result by encouraging water conservation and fixing wasteful leaks. $18,144 of the improved cash flow would result from recovering the costs of water from tenants according to their actual usage. For BP Property, the profit increase created by AMR submetering is more significant than a $30 per unit increase in rent and isn’t coupled with the aggravation and tenant turnover associated with increasing rent. Because AMR submetering encourages conservation and helps to identify water waste, BP properties was actually expecting the water bill to decrease instead of increase. They estimated that next year’s annual water bill would only be $25,704.

Adding $30,240 to the bottom line has a significant impact on the value of BP Property. Using a 9% capitalization rate, BP Property calculated that the value of their property increased by $336,000 simply by using AMR submetering.

For BP Property, AMR submetering has a payback period of only 9 months while their Return on Investment is greater than a factor of 15 times the total setup cost.

   Want to see the financial value of AMR submetering for your property?
  Use our Financial Value Calculator.

 Related Excel Spreadsheets for Download

  [Brief Financial Value Calculator (Excel)]

  [Detailed Financial Value Calculator (Excel)]

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