By David Duckwitz, Sensor Industries
A recent Seniors Business Housing article, Why So Many Investors Are Chasing Active Adult, pointed to the favorable investment trend in active adult housing. The demographics driving that trend are the 70 million baby boomers ranging in age from their late 50s to mid 70s. While the client base is there as well as the investment interest, there are some barriers to overcome.
Despite the demand, there are a limited number of lenders in that space. The COVID-19 pandemic clearly played a role in reducing the volume of construction lenders. Some are returning to the playing field, but the majority are in limbo waiting to see how things unfold as we emerge from pandemic lockdown. Still, it’s a safe assumption that a portion will not return. Other issues include bank consolidation and recourse financing.
In a nutshell, the demand is there but lenders are wary. So what are some proactive measures to assure lenders that projected costs can be reduced upfront, which is a way to increase net operating income and equity value? One of the ways seems counterintuitive but is nonetheless a proven avenue — investment in water conservation technology.
Cash down the toilet
Toilets account for the highest water usage and waste among fixtures. Installing low-flush toilets won’t completely solve the issue. While the volume of water usage is reduced, mechanical failure of toilets is the main culprit, leading to substantial volumes of wasted water and high sewage costs. Data analysis backs up this fact: Over 50 percent of total fresh water is wasted in seniors housing.
A small toilet leak can waste up to 250 gallons of water per day; an open flapper can waste up to 5,000 gallons per day. Several case studies and water utility research confirm that 20 percent of all toilets leak an average of 200 gallons of water per day. What’s the bottom line? What will leaking toilets cost you? Here are our calculations, based on a water cost of 2.5 cents per gallon.
478 annual leak events, 34,000 gallons of water lost per day, 1.01 million gallons lost a month, 12.4 million gallons a year, $310,000 lost per year.
239 annual leak events, 17,000 gallons of water lost per day, 509,000 gallons lost a month, 6.2 million gallons a year, $155,000 lost per year.
48 annual leak events, 3,400 gallons of water lost per day, 102,000 gallons lost a month, 1.24 million gallons a year, $31,000 lost per year.
You may think, “good to know for retrofits but new builds won’t suffer the same issues due to newer toilets.
Despite the quality of a toilet, the simple mechanics of toilet parts like the rubber flapper inevitably break down and cause leaks. Then onsite maintenance staff replaces the bad parts and fix the leaks when they are discovered. However, the vast majority of seniors don’t report leaks even if they are detectable. Unless your maintenance staff is performing regular maintenance checks, a leak could go on for a very long time — and that wasted water is lost revenue.
Another significant contributor to water waste and the number one insurance claim is indoor flooding, a common occurrence in seniors housing where a tenant may turn on water to fill a sink or tub and forget about it. Because these kinds of floods will likely impact other tenants’ units, flood claims range between $20,000 to $60,000 per claim on average, and it’s not uncommon for a flood to cause damages in the millions.
The message is that water conservation and flood mitigation are not only important for the environment and our communities, but also for your bottom line. So where to begin?
Which options will help?
Regarding toilet sensors that identify leaks, there are several products on the market, but they’re mainly geared for consumer use. Some lower-end products are battery-powered and rely on user awareness and interaction. That’s not ideal for seniors. An alternative is a higher-end mechanical solution, but the mechanical components will eventually break down. Leaks and floods can still go unnoticed.
One more extreme solution is the auto shut-off valve. When a leak is detected, the valve shuts off entirely. The problem with those is that one small leak could shut down the entire flow of water into a building or a large portion of it. A small toilet leak in one unit could leave hundreds of seniors without running water until that leak is fixed.
Regarding flood sensors, there are several devices on the market, but these are also primarily geared toward consumers. For commercial use, a more robust system is needed that identifies leaks, provides alerts and reports them in real-time. WiFi systems are unreliable and not designed to handle the volume of monitoring and reported needed for seniors housing.
The good news is that there are cost-effective ways to reduce water waste and eliminate flood claims entirely. Through today’s technology, there exists the ability to monitor toilet water waste and flooding in real-time to report issues before they become catastrophic events. IoT (Internet of Things) devices with monitoring are proving to be the most reliable and effective.
IoT devices use low-frequency transmitters to send information to the cloud, where it is then disseminated to the respective parties. The battery life of these devices is normally several years, and they operate 24/7 so they’re highly practical and functional. IoT also allows for better scaling and reliability compared to WiFi alone, which is extremely important when spread over a large seniors housing campus.
By effectively monitoring for malfunctioning toilets alone, you could reduce your water utility costs by over 20 percent while increasing net operating income and equity value.
On the indoor flood issue, these events can’t be avoided entirely, but early detection can prevent catastrophic flood events and all associated costs, including displacement of tenants, remediation and increased insurance premiums.
While there’s no guarantee a lender will provide a better rate or increased funding by having such measures in place, it certainly provides leverage in your negotiations to show quantifiable monthly cost savings and increased equity value. By implementing said technology, it’s a win for the lenders, investors, the environment and seniors alike.
Dave Duckwitz is the CEO of Sensor Industries.