💡 NOI Hacking™: The Secret Landlords Can Use to Unlock Hidden Value

My name is Dave Dubé, founder of moneypartnerformula.com, and this show is built for everyday real estate investors who are actively doing deals and looking to scale using other people's money. So if you're an active real estate investor and you want to get featured on the show to talk about your own real estate and capital raising experiences, then just go to daveinterviewsyou.com. Now let's get rolling with this episode and remember to subscribe for daily interview content. Hey folks, welcome back. Let me ask this, are you a small Multifamily owner, landlord, or are you into larger multifamily properties? So either way, chances are you might be leaving some profit on the table. There's all sorts of ways to increase the value of properties, and especially when you're into multifamily, the more profitable your property is, the more valuable your property is. And today's special guest is Tiffany Mittal. And Tiffany is doing something really, really unique with her properties, her smaller properties, that some of the big guys figured out a while ago, but the smaller landlords are having a challenge with. And that is really, really, really turning utilities into a profit center. So Tiffany, welcome to the call. Great to have you.

Yeah, thanks for having me on.

So Tiffany, give us a little snapshot of what you do as a real estate investor, and then we'll talk about the problem that you have created a solution for, for other real estate investors?

Uh, yeah, so my husband and I were multifamily investors. Um, we have about 130 units right now. We've been in transition, transitioning our portfolio from San Diego to South Florida, and, um, that's been its own exciting journey. Um, and yeah, we just had a lot of problems that small investors face when it comes to having any kind of buying power. And so we noticed issues within our own portfolio, which is why I kind of set out to solve some of these issues. And then we realized, hey, this actually creates a lot of value within our portfolio. So we want to kind of help the little guy just the same way we needed help, um, back when.

Okay, well, let's, let's zoom out on that and let's explain how— what the challenges are and, and how you first of all, figured that out yourself and how you're starting to help other investors with this. So kind of walk me through where the light bulb went off for you with your own properties. Tell me the story about that.

Well, being in Southern California, you can imagine San Diego especially is like the bottom of the barrel when it comes to water supply. So it's really the utilities, you know, the utilities in California and really across many cities in the US are just astronomical. They've gone up, you know, tenfold. fold over the past few years, and it really eats into your NOI and eats into your profits. And so we were trying to figure out, okay, how do we solve this problem? You look at the institutional guys, what are they doing? We had heard of this, of this thing called RUBs or ratio utility billing, which basically is taking your property from landlord-paid utilities to tenant-paid utilities. The big guys have been doing it for years, but I called around to all the different service providers and they all said, I'm sorry, you're too small. We're not going to do business with And I was just— couldn't believe it. So yeah, that's like the biggest problem is just size and utilities are just continuing to go up.

Okay. So what I'm hearing you saying is you bought properties and utilities were at a certain price point and that was manageable. You could rent out the properties, you could include the utilities for, for your tenants. But very, very quickly, the price of utilities just went through the roof and it was kind of tough to pass those on to your tenants, especially in California, because I think it's a very tenant-friendly So, you're trying to figure out ways to legally and ethically pass on those, lower that utility cost for yourself. You saw that some of the big guys figured out this whole RUBS thing where they're able to, I guess, maybe explain what that means again.

RUBS stands for Ratio Utility Billing System.

So, what does that mean? Yeah.

When you do utility billing, you have 2 ways you can do it. You can either put a submeter on your unit or you can do this mathematical formula that says the number of occupants in your unit plus the size of your unit, the bigger sizes pay more, the more occupants pay more. It's a fancy calculator, but net-net, you get about the same back as an owner. So if I'm getting the same back regardless of how I bill, why would I dump a bunch of capital into my properties? You know, the dirty little secret with meters, like, yes, they're as close as you can get to exact usage, but, you know, you have meters, you have meter reading systems, you have all these repeaters and boosters, and, and the batteries all break at different times, and it's a huge capital expense, it's a huge maintenance expense.

Yeah.

And so, or it's like this no out-of-pocket mathematical calculator, and net-net, I'm getting the same. So We're going to go with the calculated version.

Yeah. Okay. So, you came up against a challenge that none of the utility companies wanted to deal with you because you were too small. How did you solve that challenge for yourself first?

Well, I really don't like being told no. So, I decided to backdoor the system. And so, I had gotten into multifamily. My husband had been in it his whole life. When I was in grad school, I was helping my husband with his apartments and realized this is so hard. I don't want to deal with your bedbugs and crazy maintenance issues. So I saw this problem and decided to pivot, and I pivoted and decided to go work for these billing companies and like backdoor the system to learn everything I could to learn so I could like bring it back and figured they'd have to take me on by default.

Okay. So, you were in property management. That sucked. You didn't like it. Tenants, toilets, bedbugs, all that kind of stuff. You kind of saw this opportunity with the utility billing situation. They told you no. So, you said, screw you, I'll go work for you. Figure it out from the inside. And then, that's how you got your foot in the door. So, how did you convince them? So, how did it all start, Tiffany? Like, what size of a property did they start with? Or did you convert your whole portfolio or what? Tell me a little bit about the story about that.

So this was the biggest aha moment for us. So we started with our first 36-unit property. My husband was like, oh, all my tenants are going to move out and people are going to be mad. I said, no, no, I've done this for a little while. Everything's going to be fine. And instead of—

Because you were doing this for the big guys.

I had been doing this for the big guys for a while at this point, about 6 months or 8 months or so. And then we, you know, instead of a flurry of move-out requests, we had a flurry of maintenance requests. All the people who weren't telling you that their toilets were leaking and their faucets were leaking and because they don't want you in their unit to see their extra pets or their extra tenants or their grow house or whatever, like they don't want you in their unit.

Yeah.

And so all of a sudden when they get a bill, the tenants feel accountable for the bill. So then they're like, oh, by the way, my toilet's been running for 6 months, or my faucet's been leaking. Like, all these things start coming out.

Wow.

And so that's helping you get, you know, saved on consumption. But it wasn't until that following year, we had gotten about $36,000 of utility reimbursement income, which is offsetting the expense, right? So about $1,000 a unit per year. That $36,000 is a direct hit on your NOI. So we went to go get the property refinanced. They valued the property at $1 million more just for that $36,000 of additional utility reimbursement income. And that was when the light bulb went off. And because they gave us a cash-out refi of $500,000, which we used to buy another property. And then we were like, oh my gosh, this isn't so much about utilities. This is about forced appreciation.

Yeah.

This is what can I do across my entire portfolio To cash-out refi, use that money to buy new properties, and use this as a mechanism to grow our portfolio.

Yeah.

And that's when I was like, oh my gosh, no wonder the big guys are doing this.

Yeah. Okay. So yeah, it really hit a— good thing you started with the 36-unit, not like a duplex, so you could kind of see this on scale. Okay. Logistical question for me, especially because you were in California doing this and they're pretty persnickety with landlord tenancy and all that kind of stuff in favor of the tenants. If I'm not mistaken. How did you make, like, legally, how did you make that switch or how did that work? Were you covering the utilities for your tenants up until then? And then it was just like an overnight thing. Surprise, here's a bill. How did, like, how did that work?

Well, you can't necessarily change anyone's lease, right? So typically the first year, if you have a bunch of people in leases and maybe in California, I think post-COVID, very many landlords aren't necessarily renewing leases. They're just going month to month. This is before that though. So we had some leases that had to expire. So you typically blanket the whole property with 30-day notices, introductory letters. So you don't like just, here's your 30-day notice, but you're like, hey, conservation-heavy messaging. We're all doing our part to conserve. We're hoping to save 20% if you do your fair share or whatever in the letter, right?

Yeah.

You give them the 30-day notice. So you have this kind of rolling as the leases expire, you're bringing more and more people onto the program and they're getting a new utility bill along with their rent. So it can take a good 12 months if you have a lot of people in long-term leases. If you have everyone on month-to-month, you can basically implement this within 30 to 60 days.

Wow. So is that the case that you guys were in with the 36-unit? Was it mostly month-to-months or how did you—

We had probably about 25% of our units that were in leases. So, and we have a good chunk of our units that are on Section 8. And so But that wasn't a problem. You know, they were in expired leases. They weren't continuing leases. So we could just issue 30-day notices, 60-day notices on the ones that were on Section 8. So we were able to implement the program pretty quickly. We had actually a little bit in advance because I knew this was coming up. We had implemented the program probably 8 months after I started working there. I had actually told my husband to issue the 30-day and 60-day notices within the first couple months of working there. So we had a little like 6-month leeway before we actually started.

Right.

the program of getting some of those leases to renew.

Nice. Okay, so that light bulb went off for you with you and your husband, your portfolio. When did you decide to turn this into a business, into a service for other landlords? What does, what does that look like? I see Utility Ranger there on the screen. Tell me a little bit about what you've, what you've built from this.

Well, the company I was working for, I think I was employee number 4, and we had grown that company from $100,000 to $20 million in 5 years. And so it was this rocket ship of growth because the institutional guys had been doing this for years, but this middle market of people that were really like 3,000 to 10,000 units really hadn't implemented it. And so it was just really easy to implement it at that point because these guys were— it was like shooting fish in a barrel. Like they needed to do something and they have a huge portfolio. So I had seen the massive growth, but nobody was really addressing the lower market where I Lived at. This was my company.

Yeah.

And so it was just like, hey, we have tons of people doing this as a service. We can't afford to spend all of our time on these little guys, whether it's 2 units, 10 units, 20 units, 100 units. Unless you had 1,000 units or more in your portfolio, we were turning you away. But we had customer service. We were turning a ton of people away in the smaller market. But all the billing companies were doing this because it just wasn't worth the amount of time. And so, you know, it really wasn't until my sister who had about a dozen units who had called me and said, hey, can you help me do this? And I'm like, I'm sorry, I can't take you on as a client. So I like built her this little Excel calculator of all the formulas and told her to start doing it. She started seeing growth within her portfolio. And I said, you know what, if I can help her do this, like there's this huge segment of the market. It's about 30 million plus apartments in the United States. Half of that market is mom-and-pop owners with portfolios under 1,000 units. Like, that's half of the multifamily supply in the US, totally underserved with pent-up demand. And I said, well, how can I take this service model and turn it into a software model? So you don't need the bigger guys, you don't need these service providers to do it for you. And a lot of the service providers, no one wants to talk about it, but And I know this because I've worked for all of them or a couple of them. They're making 30% of their revenue off of late fees. There's really no incentive for them to collect because they're making so much money off of late fees and they get nickeled and dimed. And people would give us bills of $5,000 and you're giving them reimbursement checks for $1,200 or $2,000. And a lot of that's because all these fees are adding up. So they're making a ton on fees. So I have my owner-operator hat on and I said, let's just make it really simple to where you just pay a flat flat fee. You don't have all these other nickel and dimes. You collect it yourself, and it's just really simple, and you can actually take a lot of that money as additional revenue. So instead of paying it out to the service company—

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So just wanted to capture—

Let me see if I understand this then, Tiffany. So basically, let's say I own a 20-unit building somewhere and I sign up for your service. I don't necessarily change utility provider or anything. I plug into your software, and it helps me to divvy up my building per— by unit so that it, it has the same basically rubs effect that, that you're talking about, right?

Mhm.

And then, so let's say for easy numbers, my utility bill is, I don't know, $2,000 a month or something like that. Okay, so then I, I can divide that up amongst the 20 different units and charge them and collect that $2,000 a month myself. So my, my net expense on utilities comes down to pretty close to zero, increasing my net operating income by $2,000 a month, increasing the value of my property by $700,000, whatever it is. Right. Am I kind of getting the gist there?

It's exactly— it's money back in your pocket. So you're basically Our services are like $3 a unit per month, but then that gets passed through to the tenant as an admin fee. So our service essentially becomes free. We actually allow them to add money on top of it, like to charge $5, like, or $6, whatever the service companies are charging, because essentially they've almost become their own service company.

Yeah.

Because they're doing it. So then they can make that additional revenue for themselves on top of it. So you might be taking a little bit of off your bill that you're paying for as an owner if you have some common area usage like landscaping or a pool. Right. But net-net, you're making almost your whole bill back. You might be able to make some additional money on revenue on the admin fees. And yeah, that's money back in your pocket that you were paying before to these utility companies. I mean, it's huge. It's kind of a no-brainer.

Yeah, it definitely is. Very, very smart. So this is a software that you've created, is that correct?

Correct.

Nice, nice, nice, nice. Well, Tiffany, I think this is a brilliant idea. Hats off to you. Very, very smart. Yeah, I love it. I think that's massive value, especially for the little guy. I love that you saw that there was this glaring gap in the market and you figured out a way to bridge that gap and provide an affordable but very, very valuable service. So how long you been running with Utility Ranger and how many How many units do you have under contract or in the system at this time?

I'd say that we have— we launched in 2023, so we've been around about 2 years now in the market, and we have thousands of units. I can't give you the exact number, but we have thousands of units. We have great strategic partnerships with some of the biggest utility billing companies in the country, if not the biggest utility billing company in the country, actually partnered with us because they get so many, you know, leads that they can't— their sales team doesn't want to pick them up. So they just keep circulating within their CRM system. And so now they're giving us a ton of leads as well. And we've partnered with different property management softwares to integrate our software into theirs as well. So—

Smart.

It's continuing to grow. And nowhere— I mean, we're not going— we're going, you know, continuing to grow as much as we can, especially with AI. We're actually adding a lot of AI into our platform right now as well.

Exciting stuff. Tiffany, if people want to find out more about you and Utility Ranger, where should they go?

You can go to utilityranger.com.

That's easy. Perfect. Congratulations, Tiffany. And hey, thanks for providing a really good Really good service. I mean, that's like a Shark's Tank type business. That is just so smart.

I love it.

All the best to you and thanks for being on the show.

Thank you so much.

All right, everybody, take care and we will see you on the next one. Hey there, I really hope you enjoyed that episode. And as always, if you want to listen to more daily interview content, make sure you subscribe. And if you're an active real estate investor and you're doing deals and you'd like to get featured on this show, then just head over to daveinterviewsyou.com.