We took over a 14-unit building where the owner was paying $2,100/month in water and sewer. For 14 units. That's $150/unit/month for water alone.

Something was wrong. We just didn't know what yet.

Within two weeks of running a full utility audit, we found the problem. Three toilets running continuously, one with a flapper that had probably been bad for six months. A leaking supply line under a bathroom vanity in a unit where the tenant "didn't want to bother anyone." And an irrigation system that was running three days a week, in October, in Nebraska.

Total cost to fix everything: $340. The next month's water bill dropped to $1,180. That's a savings of $920/month, or $11,040/year, from $340 in repairs and a conversation with the landscaper.

That's not unusual. Utility costs are one of the most overlooked line items in multifamily ownership, and a disciplined audit process can save owners thousands every year.

Why Utilities Get Ignored

Owners and managers tend to treat utilities like a fixed cost. The water bill is what it is. The gas bill goes up in winter and down in summer. Electric is just the cost of doing business.

But utilities aren't fixed. They're variable. And they're influenced by factors that are almost entirely within your control:

Fixture efficiency (toilets, faucets, showerheads)

Equipment condition (running toilets, leaking pipes, inefficient HVAC)

Tenant behavior (leaving heat on with windows open, running water continuously)

Billing structure (who pays what, and how it's metered)

Vendor pricing (trash hauling, internet, cable packages)

When you treat a variable cost like a fixed cost, you stop looking for savings. And the waste compounds month after month.

The Audit Process

We run a utility audit on every property annually, and on every new property within the first 30 days of taking over management. Here's exactly what we look at.

Step 1: Pull 24 Months of Utility Bills

We request two full years of utility history from the provider. Not 12 months. 24. Two years of data lets us see seasonal patterns and identify anomalies that a single year might miss.

We're looking for:

Month-over-month spikes that don't correlate with weather or occupancy

Year-over-year increases that exceed normal rate adjustments (most municipal water rates increase 3-5% per year; anything above that needs investigation)

Baseline consumption in low-use months (this tells you what the building uses when everything is functioning normally)

We build a simple chart: month on the X-axis, cost on the Y-axis, with both years overlaid. Anomalies jump off the page.

Step 2: Water Audit

Water is almost always the biggest savings opportunity because it's the utility most affected by fixture condition and tenant behavior, and it's the one owners have the most control over.

What we check:

Every toilet in the building gets a dye test. Drop dye tablets in the tank, wait 15 minutes, check the bowl. If there's dye in the bowl, the flapper is bad. A running toilet can waste 200+ gallons per day, which adds up to $30-$50/month per toilet on a metered system.

Every faucet gets checked for drips. A faucet dripping once per second wastes roughly 3,000 gallons/year.

Showerhead flow rate. Older showerheads flow at 3-5 GPM. Low-flow heads deliver 1.5-2 GPM with no noticeable difference in experience. Swapping showerheads building-wide costs about $15/unit and saves 40-60% on hot water usage per shower.

Supply lines under sinks and behind toilets. Visual inspection for drips, corrosion, or moisture.

Hose bibs on the exterior. Are they dripping? Are tenants connecting hoses and leaving them running?

Irrigation system schedule and condition. Is it running appropriate days and duration for the season? Are heads broken and spraying onto concrete?

On that 14-unit building, the water audit took about 3 hours. We found $11,000/year in savings. That's roughly $3,600/hour of audit time. Hard to find a better return on time.

Step 3: Gas and Electric Audit

Gas and electric are harder to influence because they're more tied to equipment efficiency and tenant behavior. But there are still wins.

Common area electric:

Hallway lighting: are fixtures using LED bulbs? Swapping a 12-unit building's common area from incandescent to LED typically saves $40-$80/month.

Exterior lighting: same LED opportunity, plus timer or photocell verification. Lights running 24 hours instead of dusk-to-dawn waste electricity and burn through bulbs faster.

Laundry room: electric dryers running on 240V are expensive. Gas dryers cost about 50% less to operate per load.

Gas:

Boiler efficiency. An older boiler running at 75% efficiency versus a modern one at 95% efficiency is a significant cost difference on a 14-unit building. This isn't always an immediate fix (boiler replacement is a major capital expense), but it belongs in the capital plan.

Water heater temperature. Many water heaters are set at 140 degrees when 120 degrees is sufficient for residential use. That 20-degree reduction cuts water heating energy by roughly 10%.

Thermostat settings in common areas. We've walked into buildings where the hallway thermostat is set at 74 degrees. For a hallway.

Step 4: Billing Structure Review

This is the strategic piece. Who's paying for what, and is there a better structure?

Owner-paid vs. tenant-paid: The gold standard is individual metering where tenants pay their own utilities. But many older buildings, especially those built before the 1980s, have a single master meter for water and sometimes for gas. Installing individual meters can cost $1,500-$3,000 per unit for water and more for gas.

If individual metering isn't practical, consider a utility billing system (RUBS, ratio utility billing). Under RUBS, the owner pays the master meter bill and allocates costs to tenants based on a formula, typically unit square footage, number of occupants, or a combination.

In our experience, implementing RUBS on a building with owner-paid water typically recovers 70-85% of the water cost from tenants. On a 14-unit building paying $1,200/month in water, that's $840-$1,020/month recovered. Over a year, that's $10,000-$12,000 back into the owner's pocket.

Check your local regulations before implementing RUBS. Nebraska allows it, but the lease must clearly disclose the methodology.

Trash hauling: Trash is a utility that almost no one negotiates. But trash haulers compete on price, and rates vary significantly. We bid trash service annually and have saved owners $50-$150/month per property simply by getting competitive quotes.

Also check your container size. Many buildings are paying for a dumpster that's larger than they need. If your 8-unit building has a 6-yard dumpster picked up twice a week, but it's only half full at each pickup, you might do fine with a 4-yard on the same schedule, or a 6-yard with weekly pickup.

Step 5: The Report and Action Plan

The audit produces a report with three categories:

Quick wins (under $500, payback under 6 months):

Fix running toilets

Replace showerheads

Swap to LED bulbs

Adjust water heater temperature

Fix irrigation schedule

Medium investments ($500-$5,000, payback 6-24 months):

Implement RUBS billing

Replace inefficient fixtures building-wide

Install programmable thermostats in common areas

Renegotiate trash hauling contract

Capital investments ($5,000+, payback 2-5 years):

Individual water metering

Boiler replacement

Window upgrades for energy efficiency

Insulation improvements

The owner gets this report with estimated costs, estimated savings, and a recommended priority order. Quick wins get done immediately. Medium investments go into the quarterly plan. Capital investments go into the 5-year capital plan.

The Annual Rhythm

The utility audit isn't a one-time event. It's an annual process.

January: Pull prior year bills, build comparison charts, identify anomalies

February-March: Physical audit (fixtures, equipment, irrigation pre-season)

April: Implement quick wins, bid trash and landscaping contracts

October: Pre-winter check (water heater settings, boiler tune-up, irrigation winterization)

Monthly: Review utility line items on the PM statement for spikes

This rhythm catches problems early and keeps savings compounding year after year.

The Bottom Line

Utility costs typically represent 15-25% of operating expenses on an owner-paid multifamily building. A disciplined audit process can reduce that by 15-30%. On a building spending $30,000/year on utilities, that's $4,500-$9,000/year in savings that drops straight to NOI.

At a 7% cap rate, $7,000 in annual utility savings increases the property value by $100,000. From checking toilets and swapping showerheads.

The audit isn't glamorous work. But it's some of the highest-ROI work in property management.

If your properties aren't performing the way they should, let's talk. Reach out at Tanner@TopTierInvestmentFirm.com or visit toptierinvestmentfirm.com.

Tanner Sherman is the Principal and Managing Broker of Top Tier Investment Firm in Omaha, Nebraska. He co-hosts the Freedom Fighter Podcast with Ryan of Avara Investments.

The Utility Audit That Saves Owners Thousands Every Year