Understanding Multifamily Lingo : “HVAC is ABP”May 08, 2020
This one can be seen in a property package, which says HVAC is ABP. But what does that mean?
Well, HVAC is ABP means Heating, Ventilation, and Air Conditioning is All Bills Paid. This is versus tenant-paid.
As we all know, we don't like to do all-bills paid. There are things that you need to know what to do when you're looking at the financial statement.
If you see utility income on that statement or on the income section, that means that the tenants are paying up for a portion of the utility. You need to take your finger right down to the expense line item for what the utility expenses are. If you see the utility income is $60,000 you follow your finger down to the utility expenses. I can almost guarantee you, it's not going to be 60,000 bucks for the expenses. It's probably going to be closer to 100,000.
In any type of a situation where you're billing back the utilities to the tenants, you’re never going to get a dollar for dollar payoff. Usually about two-thirds of the income for, you know, the total 100 percent, for every dollar you collect in expenses, earn in expenses, you only collect about two-thirds in income, and that's on a good day.
So that's why we never want to look at all bills paid property. I know there are certain situations where we do, but you've got to understand what you're getting yourself into in those scenarios.