There are many ways to save money on your utility bills but I want to share some ways to get 80% of the benefits by working on 20% of the options available to us as landlords. We are all busy and we need to focus on the stuff that gets results.
I'd like to share some tips for managing your utility costs in HMO properties. By following these tips, you can keep your tenants happy and save money on your energy bills!
1. Track your utility costs so you can identify any patterns and make necessary adjustments.
My most important tip is to know your spend. Track your utility bills over time and see where your money is going. This will help you make informed decisions about how to reduce costs. If you can identify which appliances are using the most energy, you can make changes to save money. For example, if you notice that your tenants are turning on the heating in summer to dry their clothes, you can do something to help Eg. Install washing lines, a tumble dryer that will dry the clothes and not heat the whole house too.
It's important to track meter readings (not just the pound notes), and this can be useful as you can track per HMO in your portfolio what is creating extra costs. I know one of my students did this, and managed to 'track' down an offending portable heater in a new tenant’s room, the usage went up when the tenant moved in. The new tenant was asked, and they offered up the information about having a personal (non-allowable) heater.
2. Don't hide behind monthly payment plans.
Having a fixed monthly bill is great for budgeting but very poor for identifying what your true profit is. I have personally disliked and left utility companies that only take estimates, I'd much prefer to pay the utilities due in the month, this helps me know my TRUE profit and if I need to do anything, such as rent reviews or proactively discuss utility costs with tenants. Having a payment plan, can tie you to a supplier when it comes to renew, if you can't afford to pay off the balance, you could end up with a big monthly payment plan, rolled up into a new monthly payment plan.
3. Educate your tenants about conserving energy, heat, light and hot water.
Encourage your tenants to take shorter showers, turn off lights when they're not in the room etc. Ask them to use cold water instead of hot water for washing clothes, not automatically use a 50 degree wash if not necessary. Hot water is a significant part of utility costs. Reducing usage of hot water, can enable tenants to help themselves when it comes to rent increases. Install energy efficient appliances and light bulbs, put sensors on them to turn on and off. The list of energy efficient installations can go on, and I don’t want to list them all here, as they often require money to save money.
4. Negotiate a lower rate with your utility company.
No easier said than done in the current climate, watch the market and keep up to date. There is an opportunity to fix perhaps a higher price for certainty, which can be extremely useful. I fixed one of my larger HMOs in Feb 2022 for 2 years at a 50% higher price than I'd been on which was all energy price cap. However, this now feels like a great decision but it was geared around ensuring profit for 2 years, so I know what rents to be charging to get my profits. Also keep an eye on upcoming price cap changes. If you are putting up tenants rents, consider the next price increase on energy prices, and build some of this into your rent review, which you can only legally enforce once per year but energy price cap changes are 6 monthly.
5. Tell tenants what they are spending and what other properties are spending, anonymously.
If you benchmark them as the worst performing property, they can help you identify savings. If tenants are aware of their usage, they can adjust it as needed. If you don’t communicate what their bills are, they are going to assume there is no problem, and turn the heating on to dry their shirt for their Saturday night out. Nobody wants to be on the naughty list.
6. Over 50% of utility costs are from heating hot water and central heating.
One investment that is going to make the biggest difference to your bills is the biggest consumption of energy – boilers! Consider replacing old and inefficient boilers. Some boilers can reduce energy consumption by 78%-82% if they are over 11 years old. https://www.boilercentral.com/boiler-advice/how-to-save-on-energy-bills/
As a landlord, it's important to keep your utility costs low so that you can make a profit on your investment. Summer is a great time to get into managing utility costs, it can really help you take the seasonal winter heating impact out of your utility costs and time to really get a grip on those spiralling costs. Implement some things right now, so you can benefit over winter.