repairs and capex too high, tips?
Good morning,
We've been at it for nearly 6 years. We've bought lots of distressed buildings and plowed all the profit back into them. Now we're trying to get a handle on repairs expenses and capital improvements. We're desperately trying to reach those magic numbers: 8% repairs / 5% capex reserve (as % of gross income). We're in the combined 30% range with no sign of lessening although our goal is a combined 20% for 2015.
I dont' do much of the work myself. I own a lawn care company and web design company and do most of my "make money with my body" through those venues. I have a man who's worked for us 2 years as a contractor (we account for 70-80% of his revenue). We pay him 27 an hour for regular work (carpentry, light plumbing, etc. etc.) and 23 / hr painting.
My concern is that our "overage" is all in his department but I don't want to blame HIM for it if it's not his fault. It could be ME doing too much too soon (replacing 18 windows when 8 would do this year, 10 next, etc.) The problem is, I don't have the skill to know whether he's slow, just right, or kicking ***. He is a devout Christian, works his *** off, and has demonstrated over and over again that he 'has our backs.' Hence if I could discover he's too slow, or inefficient, or making choices that cost more than an alternate choice, I could steer him toward a solution (education, etc.)
To his credit, he has saved us alot of money with some things he's discovered and fixed that other higher priced people did or could not. We do like things done nicely. We use engage luxury plank flooring so we won't ever have to replace (at 2.85 SF), we do 2 tone Sherwin Williams paint because we don't like the low income "off white" everything. We put vinyl replacment windows in at 300-400 a pop (old buildings, 5-6' high windows sometimes). We move every week, we plow and shovel the way a homeowner would, we fix things that are ugly. Part of it is me: I am like an assassin when it comes to checklists. So again, I might put all 18 windows in vs. 9 now and 9 next year. However, I am NOT the "side by side fridge, granite counter top in the section 8 efficiency" type of guy. I don't do the real super newbie stuff. But we do like things to be nice. We might leave a battered linoleum kitchen floor but replace the living room rug for example. We try not to do EVERYTHING at once but stil... 360K gross and we're still spending 90-100k on repairs and capex.
Most of the "overage" comes from "stuff we'll never have to do to that unit again" so that's comforting. (i.e. replacing windows, floors, repainting 2 tone in unit we bought that's all cream, new floors, new kitchen or bath vanity, etc.) We will eventually run out of those things. Maybe that's the answer. When we only do one renovation on one unit per year the expense will "take care of itself."
Any thoughts that come to mind, even if it's only one piece of what I've rambled about, are welcome. I'm just looking to brainstorm. At the "end of the day" I've got a GREAT man that I want to help be successful and I'd love to at least be able to tell if he's delivering value or needs some help.