The 5% Rule: How One Utility Billing Shift Added $1M to Our Property Value

The Wake-Up Call

When we bought our thirty-six-unit building in El Cajon, California, we weren’t thinking about utility billing. Honestly, we were focused on paint colors, vinyl plank flooring, tenant turnover, and how quickly we could fill units to keep cash flow positive.

Like most multifamily owners, we assumed rent increases were the main path to growing value. What we didn’t realize yet was just how powerful expense reduction could be.

That building became our wake-up call. It was the property that introduced us to the power of what I now call BRRRR 2.0.

The 5% Rule That Changed Everything

The five percent rule is simple math:

• For every $1 saved in annual expenses (or $1 added in income), you increase property value by $20 at a 5% cap rate.

So:

• $100 in extra NOI = $2,000 in added property value.

• $5,000 in annual savings = $100,000 more in value.

This isn’t just theory—it’s reality. In year one, after implementing RUBS (Ratio Utility Billing System) on that El Cajon property, we recovered about $1,000 per unit annually. That’s $36,000 in yearly NOI added—without raising rents or swinging a hammer.

At a 5% cap rate, that boosted our property value by over $720,000. And when we refinanced through Freddie Mac, strong performance allowed us to justify a valuation increase of over $1 million.

That was the moment it clicked: NOI isn’t just about cash flow—it’s about forced appreciation.

BRRRR vs BRRRR 2.0

Most investors know the traditional BRRRR strategy: Buy, Rehab, Rent, Refinance, Repeat. You add value through renovations, higher rents, and then refinance to pull equity.

Don’t get me wrong—I love a good rehab. I’ve painted countless walls and installed my fair share of kitchens. But traditional BRRRR assumes value creation comes only from spending money on renovations.

BRRRR 2.0 flips the script.

Instead of relying solely on rent bumps and renovations, BRRRR 2.0 uses operational improvements to drive NOI:

• RUBS (utility bill recovery)

• Pet rent

• Storage fees

• Wi-Fi

• Trash billing

These aren’t one-time upgrades. They’re recurring, compounding improvements. Every year, those dollars continue to grow value without additional investment.

That’s the beauty of BRRRR 2.0—it’s scalable, repeatable, and doesn’t rely on swinging a hammer.

From “Too Small” to Scaling Smarter

The surprising part? At first, we couldn’t even get access to RUBS. Traditional billing companies told us we were too small. Too “mom-and-pop.”

So I did something crazy—I got a job with one of them. I learned the ropes, understood the system, and eventually got them to take us on as a client. That stubborn decision changed everything.

Rolling out RUBS and billing tools across our portfolio added over $2.5 million in value. That’s when I realized: this wasn’t just a nice-to-have. It was the missing piece.

And that’s how Utility Ranger was born.

Building the Platform I Wish I Had

I knew there had to be other owners like us. Operators with 12 units, 30 units, 50 units—getting told they were too small. So we built Utility Ranger, a self-serve billing platform that empowers small operators to bill like the pros.

Want to add pet rent? Check.
Storage fees? Check.
Wi-Fi or trash? Check.
RUBS? Absolutely.

And here’s the best part: it’s a pass-through fee. Landlords don’t eat the cost. Residents cover it as an admin fee, meaning it’s effectively zero-cost for owners—yet adds real NOI and property value.

Why Every Dollar Matters

The five percent rule changed how I look at every property:

• Every dollar matters.

• Every unit counts.

When you stop absorbing utility costs and start passing them through—legally, fairly, transparently—you unlock hidden value.

That’s BRRRR 2.0. And it’s how we scaled smarter without spending on endless renovations.

Final Thoughts

If you’re still covering water, sewer, or trash for tenants, you might be sitting on hundreds of thousands—even millions—of dollars in hidden value.

It’s not about being greedy. It’s about being smart, sustainable, and scalable.

That’s the lesson our El Cajon property taught me. It’s what BRRRR 2.0 has done for us. And it’s why I built Utility Ranger—to help other operators capture the value we almost missed.

👉 Ready to stop leaving money on the table? Let’s talk.
Utility Ranger makes it simple.