Currently a 2nd year analyst in the Midwest at a vertically integrated firm. In sitting in acquisitions and asset management meetings, and in going on property tours, I'm continually lost when conversations turn to Cap Ex. Wanted to ask the community if there are any books or resources people would recommend to not only understand different multifamily Cap Ex, rehab, and construction items but to also understand their costs.
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Capex is any expense that can be capitalized. Rehab/construction items are capitalized for depreciation. The two main types of expenses are opex and capex, with opex being expenses that occur every year and capex being items that have a useful life of more than a year. Think of opex as paint/cleaning supplies/professional services (maintenance workers, landscaping, etc.) and capex is like replacing parking lots, replacing elevators, replacing a roof, etc..
I'm aware of what CapEx is itself. I was just looking to see what resources people had to better understand items like appliances, roofing, and flooring etc. Wanted to get a better understanding of the different items and their maintenance/replacement costs.
Try the Sears catalog
Do you not have resources within your company you can talk to? If you're fully vertically integrated, you definitely should. The asset management team should certainly know within reason what the project costs are when it comes to unit renovations, property value-add and asset preservation as they're the one seeing and paying the contractor bills. You can't really pull up any books or resources because material pricing has remained pretty volatile while contractor pricing has come in a little bit given that there are less projects to bid on, so anything you look up could be out of date.
My company has an internal construction team so it is easy for me stay on top of what the "actual" costs are on projects. But for example, we used to be able to do a full unit renovation for around $12,000 (pre-Covid). The same renovation today is now around $17,000.
I can walk through a property and quickly spot a deferred maintenance item and/or value-add opportunity (say repaint the gym/add new equipment) and be able to put a round figure on it. But I have probably toured 500 properties and have gone through the painful experience of putting a deal under control and then discovering a six-figure capex item I didn't see or account for...
Trade shows. Gets you in front of a range of products and vendors who are there to explain what they are trying to sell and what the pros/cons of their products are. It's a great environment to visually see products and talk through how they work with the company reps. As an added bonus it'll also possibly get you so knowledge of newer products or technologies coming on to the market.
Just ask a broker. It's $300/unit. Easy game.
I did capex from a CM perspective for multifamily and office before being a developer so I'll cook a bit here. I'd think of CapEx from 3 buckets here and go into details below:
Unit Turns:
- Largely cosmetic, fast turnaround, little to no permitting if not rearranging walls or touching anything outside of plumbing/electrical fixtures
- Think paint & carpet at a bare minimum, adding plumbing fixtures, countertops, light fixtures, and appliances as needed.
- I'm a little dated on pricing, but think around $40k for the works, countertops, click flooring, full appliance package, etc. Paint & carpet alone these days is like $5-6 bucks a foot for cheapest options. Carpet largely being the cheapest option, tile bathrooms & click floors in rest being the more expensive option.
- This can be done with a turnkey contractor that you flip units over once the leases roll. Think maybe a month of downtime or so. Depends on scope.
- Couple tips and tricks I've done in the past to make this whole thing more efficient, get a cheap ID to design some finish packages based on different styles. Maybe 2-3 for each demographic, IE Urban Core, Suburban Ish, pure Suburban Garden Style. Have them spec finishes and get a menu for basics. Use menu for generic pricing and slash/cut scope as needed to fit your budget. Rinse and repeat.
- There are turnkey guys that do stuff like this, where they're kind of a super sub and can do all the cosmetic work. Try to cut scope to remove permit requirements. Basically try not to touch drywall, wiring, and plumbing configurations.
- Less required and more needed to keep up with the market.
Common Areas:
- Think your clubrooms, fitness centers, and corridors.
- Corridors are similar to unit scope, think fixtures, paint and carpet. Cheap contractors and no real A/E needed. just spec some finishes and go to town.
- Clubrooms, fitness, and lobby areas are largely going to require real architects and designers, you need them for permitting, layouts, and permits. Likely going to punch holes in walls and move things around.
- Schedule extremely variable, will need additional oversight and "real" general contractors to price it out. "real" GMP contracts rather than T&M/lump sums based on complexity. The more walls the break down the more complicated it gets.
- Less of a necessity and more to keep up with the market.
Building Systems
- Think roofs, major HVAC systems, facade, windows, curtain wall, etc.
- Think like once every 10-20 years or so.
- Likely a single trade specialty subcontractor unless you need multiple trades. Will likely need engineered designs from the subs, may require master architect.
- Likely will need permitting and submitted design for this.
- Pricing and scope highly variable.
- Scope dictated on PCAs, engineering recommendations, age of building. Think of major building systems - water, electric, HVAC, and how to keep out the elements. Nearly all of this is going to be "mission critical" and more of a need than a want.
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