How Leaky Toilets Revealed Thousands in Savings for Our Newest Apartment Building

Jan 30, 2024

A $7 Fix That Transformed the Bottom Line

As a multifamily investor, I’ve learned firsthand that one of the fastest ways to add value to a property is through increased operational efficiencies. These efficiencies can happen in a variety of ways, from adding motion sensors to lights to requesting several quotes for insurance or, as our latest property showed us, by addressing leaky toilets.

Using tools such as our property checklist, our team dug into the trailing 12 financials of a 71-unit property we were under contract to purchase and made the discovery that leaky toilets were likely adding thousands to the building’s operating costs each year. 

Let’s talk more about this example and how it can be applied to a variety of situations in real estate ownership. 

Discovering the Leaking Toilets

As a means of tracking market standards for expenses, our team keeps a running log of every property we underwrite. 

As part of a property being listed for sale, their trailing 12 financials are typically disclosed. By saving that information, we utilize our Property Checklist and can quickly see pertinent data, including the average cost per unit for water at a property and compare that to comparable properties. If there is a discrepancy, we flag this as a potential cost-saving opportunity.

In the case of this 71-unit property, we noticed the cost per unit basis was much higher than similar properties we reviewed.

Why is it important to find these trends yourself? Running toilets won't always be obvious, and your tenants won't always report them. Scheduling bi-annual unit inspections (spring and fall) allows you to inspect every unit, replace smoke detectors, furnace filters, and check for leaky plumbing fixtures.

Why is this so important? Oftentimes, a tenant doesn't think anything of a slowly dripping faucet or a toilet that runs a few times throughout the day. Over time, they may become accustomed to it as the problem gets worse. 

If you are never in the unit, things like this can quickly spiral into bigger problems for you as the owner. Our team was able to spot this through our heavily detail-oriented approach to property research and acquisition. After all, every item on the bottom line makes a difference.

The financial impact of these leaks

On face value, a leaking toilet might seem like a minor issue. However, our experience in underwriting, due diligence, and operation of multifamily properties over the years has shown that these are the exact kinds of issues that should not be overlooked. 

Let’s break it down. 

According to public utilities data, one leaking toilet can waste between 100-300 gallons of water per day. If you have five leaking toilets at your property, that is 1,500 gallons of water wasted each day, or nearly 50,000 gallons each month.  

On an annual basis, we are now looking at over 550,000 gallons of water wasted! This amount could cost you $5,500 per year – all for just five leaking toilets that could have been fixed quickly with a silicone flange that costs less than $10. 

In the case of our 71-unit building, we determined that leaking toilets could be costing the property $30,000 or more in annual revenue. Based on today's market for property valuations, that could affect the value of the property by over $450,000!

The broader impact of these leaks

550,000 gallons of water might be costly to your bottom line, but it also results in a major waste of our natural resources. Responsible property management requires us to take these environmental impacts seriously. Operating with these principles top of mind will also result in you having a positive reputation among your tenants and colleagues. 

Similarly, operating from a proactive approach with consistent attention to detail will buy you capital with your tenants and investors. (It will also save potential frustration from tenants who are annoyed by the sound of consistently running toilets). All in all, these factors will also bolster your tenants' quality of living.

Lessons learned (and why it matters for all real estate deals)

The overarching lesson in this story is clear: Small details matter in multifamily real estate, and meticulous attention to property maintenance ensures long-term success. The sooner you do it, the better off you’ll be.

Consider this 71-unit property we were poised to purchase. Our thorough inspection, including a deep dive into its financials, unearthed the hidden costs of leaky toilets. By catching and addressing this issue early, we were poised to not only save thousands in potential revenue loss but also protect the property's long-term value.

The bottom line:

Saving even $3,000 on one item could translate to a 1% higher return on investment for investors and owners. This is one of the lessons we discuss in Invest Wise Multifamily’s Intro to Buying Multifamily Properties– a program where we encourage new and seasoned investors to embrace a detailed approach, prioritize preventative maintenance, and protect their investment for the long run.

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