Real Estate Ideas for 2013 Part One
What can be done collectively to improve our businesses, save costs or generate additional revenue?
On January 1st I posted a list of ideas that I had that some of us could consider to collaboratively work on. I intend to pursue one or two of the ideas presented and may entertain partnering with the right person or persons.
This post is the first of my more in depth notes on the ideas. I will post others over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com
Reducing Maintenance Supplies costs
Pre 1950 buildings in lower income neighborhoods require around $100 per month per unit for repairs, replacement reserves and improvements. Newer buildings in more affluent neighborhoods perhaps $50 – $65. This is all maintenance from leaky faucets and unit turnovers to new cabinets, new roofs, electrical upgrades, replacing parking lots ect.
Do the math on your units over an extended time period. Do not forget to include a reasonable value on your time. You chose $10 an hour? Why not work for me or McDonalds. Make more per hour and avoid all the hassles of ownership? 😉
A quick check of city data files shows there are 159,658 rental units in the City of Milwaukee alone, inclusive of rented units in owner occupied buildings. Let’s assume a low ball $50 per unit per month in repairs, replacements and improvements. Annually that is a whopping $95,794,800. Yes, nearly $100 million per year. It actually could be a much larger number. Even 1% savings is a lot of money.
So what can be done?
Improve supply sourcing: Collectively finding the best deals and creating good deals through group purchases.
We did this a couple years back when the CO detector law went into effect. Prices then for COs were in the twenty dollar range. My company alone needed around 2,000 CO units. So we shopped the best deal and found where the quantity price breaks were. We brought in a bunch of other larger owners and the final price dropped to eleven something each due to the number of pallets ordered. So four or five hours of my staff’s time saved our company and the other participants collectively tens of thousands of dollars in a single transaction.
Last spring myself and another midsize owner went to the Hardware Show in Las Vegas. Between us we buy some products in quantities that equal or exceed an independent corner hardware store. In Vegas we found good deals on a number of products and vendors we continue to use today. You can read more about this trip here: http://justalandlord.com/2012/05/13/thoughts-ideas-from-the-national-hardware-show/
This brings us to the million dollar question… ‘How can we use our collective shopping experiences and buying power to improve our bottom-line on a daily basis in 2013?’
Obviously group buying is a large opportunity. There are some details that would have to be worked out to prevent this from being a burden to anyone. The CO detector deal worked because the larger the group the lower the price for all of us. I knew the other owners, but even then some backed out or reduced the number of units they wanted. In this instance it was not a problem as the request I received after placing the order exceed the ones that were not taken. But the situation could have left me with $11,000 of detectors I had no immediate need for, but a bill that would need to be paid within 30 days.
The most viable option that I can think of is a web based system where an item would be presented and people would commit to their purchase with a credit card that would have an authorization hold on the amount of the commitment, but the card would not be charged unit we reached the magic number. Once we were ready then the charge cards would be processed and the order placed. For this to work we would need a pretty short time frame to order. Seven days? If the quantity was not reached then the authorizations would be released and nothing would be charged to the owners’ credit card.
The website would show how many widgets needed to be ordered to get x pricing and how many to get y. Emails would go out saying we are X number of units away from placing the order or X number of units away from the next level price break. Some larger owners could quickly do the math and figure out if they bought an extra 50 widgets that the price break savings would make it less than they were paying for the original amount. (That happened with the CO detectors.)
There would of course be some upfront costs here, but not a lot. There would also be some admin costs finding and securing the orders.
Sharing our purchasing experiences could be an opportunity too. If we had some easy way of sharing what we were purchasing from whom for how much we would all know the best places to buy. I just do not see reaching a level of participation that would make this work. (But I’d enjoy being proven wrong)
If any of the topics interest you comment either on the list or directly to me at:Tim@ApartmentsMilwaukee.com