Apartment Budgeting: Trash Income

Trash income is not a dirty business.

It’s time to talk trash. Not that recent election type trash. Not the fiscal cliff type trash. And, not your run of the mill sports trash talk. Albeit, that has its place and is fun when kept in good spirit. No – we are talking about making some income from your apartment communities trash collection.

Trash Income Defined

Trash income comes from charging back or passing through the expense that you incur for having your communities trash hauled away. And, RUBS Trash Incoeunlike water and sewer income – trash is not a regulated utility. That means you can charge back more than your monthly invoice. For reference, I have seen this number range anywhere from $3 to $8 per occupied unit per month.  I would highly recommend that you use a third-party utility billing firm to administer this for you. Typically, this is billed monthly with your water and sewer charges. The more sophisticated services include rents and other applicable fees on the same monthly billing statement.

Budget Strategy

This one is fairly straight forward and most budget models will have a formula baked in. If not, you can take your average number of occupied units over the course of the year and divide the total trash spend by that number to come up with an annual per unit number. You can then divide that number by 12 and the answer is the minimum number you should charge per month to recoup your cost. For example:

Community: 212 units – 94% forecasted 2013 occupancy – $12,000 trailing 12 months trash bill (forecasting zero increase for 2013).

212*94% = 201.4 average occupied units

$12,000/201.4 = $59.58

$59.58/12 = $4.97 per occupied unit

This is the minimum amount you would want to bill back in order to recoup the full cost of your annual trash bill. Now remember – trash is not a regulated utility. With that fact in mind, I think it prudent to charge more. In this example, I think $6 or $7 per occupied unit is completely in line.

In closing, increases in utility cost historically outpace rent increases. That said, it is would be borderline careless to not share that cost with the people who benefit from the services.

Your always looking for a way to maximize revenue multifamily maniac,

M

 

pic props: Tony Jacobson

 

 

 

Author: Mike Brewer

Out to put a dent in the multifamily universe. Love compelling conversation...