How to better understand Multifamily Cap Ex?
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.
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pricing has come in a little bit given that there are less projects to bid on, so anything you look up could be out of date.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.
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