Any unnecessary water usage that is the result of the malfunction or leaks from toilets, sinks, showers, pipes behind walls, foundations, pools, irrigation systems, etc. can cost you a fortune. If these inflated water and sewer costs are not corrected, not only will you lose substantial cash flow but your NOI and property value will also be adversely affected.
Property owners generally focus on seeking value-add opportunities to increase rents as a means to increasing the cash flow, NOI and property value. As important as this may be, many owners overlook buried treasury lying in the bones or infrastructure of a property that can also increase cash flow, NOI and property value substantially. A great example of this is to locate and repair water leaks.
Ground zero for increasing cash flow, NOI and property value is to realize that “a $100 dollar increase in revenue has the same effect on NOI and property value as a $100 decrease in operating expenses. Assuming a 5 cap, that translates to a $2,000 increase in property value for each $100 reduction in water & sewer expenses. Water and sewer charges constitute a large portion of the property’s operating expenses, especially in states such as Florida and Las Vegas where water costs are extremely high. Every building is going to have water leaks but many owners don’t realize how much money can be lost. To sit back and do nothing to correct the problem is akin to throwing money right down the drain. Multifamily properties generally contain a large number of units that were built at the same time. As a result, plumbing, water heater failures, leaks, etc. tend to occur in batches. Additional problems caused by water leaks can subject owners to more liability, cost, and aggravation. While performing due diligence on a prospective property, if you uncover that the water and sewer expenses are extremely high, you notice dripping faucets, leaking toilets, and hissing sounds in the units, and you notice that no water savings devices were installed, then this situation may provide an opportunity to significantly reduce water & sewer costs and operating expenses and increase NOI and property value.
Common Facts about Water Leaks:
Sewer charges in many municipalities are directly affected by the amount of water consumption which will be multiplied by a fixed factor amount, and that will be the sewer charge.
The higher the water usage, the higher the sewer cost.
A dripping faucet can waste 3,000 gallons a year. That’s as much water as 180 showers.
Tenants rarely report to management signs of leaks such as hissing sounds from a leaking toilet or drips coming from sinks, showerheads, faucets, or the outside sprinkler.
Water leaks can subject tenants to significant health risks from mold, mildew, toxins, etc., and can result in an insurance nightmare stemming from multiple claims when one unit’s water leak quickly spreads to other units.
Water leaks lead to mildew and bad odors in the units and create irate owners and tenants.
As temperatures plummet, the risk of pipes freezing and bursting skyrocket. Pipes most at risk are those in unheated interior spaces, such as basements, attics, and garages.
Observable Signs of Water Leaks or Wasted Water Consumption:
Visible drips from faucets, showerheads, and toilets
Hissing sounds from the toilet and the hot water boiler
Constantly needing to refill the pool
Curling vinyl floors
Peeling paint on the walls
Non-Observable Signs of Water Leaks:
Broken or malfunctioning water meters
Foundation leaks: underground pipes are in constant contact with the soil. Electrolysis occurs over the years, causing corrosion of the pipes and leakage.
Broken and/or corroded pipes behind walls
Timing of the irrigation system
Equipment with the water off can still leak
Simple Water Leak Prevention, Detection, and Solutions:
Finding the exact location of the leak is the challenge. You can’t replace a broken pipe when you can’t find it, but finding the exact location involves a combination of hide and seek trial and error, and detective work.
You may need to hire a company that provides professional water leak detection services. Unfortunately, my experience is that even the professionals need to play detective, although they have more tools and experience at their disposal. Having a proactive approach in mitigating water damage will help save a property owner thousands to tens of thousands of dollars in wasted water & sewer costs and flood damages.
Implement a Water-Savings Training Program:
Implement a water-saving training program for the maintenance staff and do routine preventive procedures. These include but are not limited to the following:
Periodically advising tenants to immediately notify management of any hissing sounds or visible leaking faucets, showerheads, and toilets.
Advise the maintenance staff that while in the units completing work orders they should also;
Check for over occupancy,
Check and repair caulking around shower doors and bathtubs,
Listen for any hissing sounds or
Visible leaking faucets, showerheads, and toilets.
Have the maintenance staff check toilets for worn toilet flappers. The flapper is the rubber mechanism located inside the tank that corrodes over time. Have the maintenance staff calibrate the water flow of the toilets at an optimal flush rate.
Have maintenance staff put a few drops of food coloring or dye in the tank and wait about a minute. If the color can be seen in the bowl, then there is a leak. Have management notify tenants in advance that the water will be shut off for a two-hour period. Turn the water off and check the meter readings, then check the meters again after the two-hour period. The meter readings should read the same as before the shutoff. If the reading changed, there are probably water leaks. Install water saving devices, such as new low flush toilets, more efficient showerheads, and aerators in the kitchen and bathroom faucets. These efficient devices can save approximately 15% – 20% of water & sewer costs. Many states and cities offer water conservation programs which offer free toilets and fixtures to owners who are responsible for the labor cost to install them. Have the town periodically check the meters for malfunction. Check the timing for irrigation to see how many times a day the sprinkler system is on and check the irrigation system for leaks, especially in freezing and extremely cold temperatures. Insulate pipes for sprinkler systems or hot and cold water all year round. Check the pool for leaks. Ask how many times a week does the staff need to add water to the pool? Schedule an annual plumbing inspection. This can inform you of signs of wear and tear to pipes, equipment, etc. so you can be aware of any potential future issues. Extensive landscaping requires a large consumption of water usage. A partial solution is to use Xeriscape. Use Technology, many companies offer affordable technology so owners and property managers can monitor their property’s water use in real-time by logging in with any internet-accessible device.
Step 1: Have management notify tenants in advance that the water will be shut off for a two-hour period.
Step 2: Turn the water off and check the meter readings, then check the meters again after the two-hour period.
By becoming more knowledgeable about the causes of water leaks and their prevention and remediation, you will put yourself in a position to uncover hidden value overlooked by others and increase cash flow, NOI and property value substantially.
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