Unlocking Success in Operations
We have been active in the larger apartment space for 4 ½ years. However, we have been in the real estate business of some form for 15 years. We have been thick in the weeds of the larger apartments business during those 4 ½ years. There are some things we have done exceptionally well. There are some other parts we have had to learn to improve. This experience has made us excellent operators and great stewards of our investor's capital. We will go through a couple of items we do well that have contributed to our success and one we have learned to improve.
Accountability Meetings
Our weekly meetings with managers exemplify our commitment to efficient operations and accountability. These meetings, where we track real-time budgeting and discuss the status of vacant units, leasing, renewals, and delinquency, have been instrumental in keeping us on the right track. We ask pointed questions to identify and resolve issues efficiently, demonstrating our support for their work and our vigilance in overseeing operations. Our full access to the management software allows us to dive into any aspect of the business in real-time while respecting their autonomy. Our regionals have praised this approach and noted that our properties consistently run well due to our proactive management style. We also review budgets together, line by line, to identify areas for improvement and ensure the best use of resources moving forward. It's hard to see the progress of all that in one meeting, but over months of meetings, you start to see progress on the building is improving.
Thinking Outside the Box
The second thing that we have done very well. Always thinking outside the box and not accepting the norm of how things need to be. Here are a couple of examples. Our resourcefulness and commitment to finding innovative solutions have been critical to our success. For instance, we saved significantly by sending our electrician from LA with his crew and shipping all the equipment wholesale to the property to replace subpanels. This cost-saving measure amounted to a 25% reduction, a substantial sum of about 30k. Another example of our thinking outside the box was our diligent search for the best insurance premium without compromising coverage. We significantly reduced insurance policies across the portfolio, a feat many operators have struggled with due to rate hikes. We are also exploring selling one of our properties and transferring the entity legally during the transaction so the buyer can maintain our policy and premium, as starting a new policy would significantly increase. These are just a few examples of our commitment to improving and gaining a competitive edge.
Capital Improvements
Our commitment to continuous improvement is evident in the lessons we've learned and the changes we've made. We could have done better by reserving more cash for CAPEX items like HVAC, plumbing, roof, and remodels. On older properties, we were hit hard by these items despite initially reserving about 1k a door and adding to that. We will now increase our reserves to 2k a door and are allocating more funds for these items to ensure they can be adequately covered. We've also adjusted our property acquisition strategy, now focusing on newer properties, even if it means paying a premium. For us, 'newer' means 1990 or newer, a shift from our previous focus on properties from the 1970s or newer. If we do consider older properties, we ensure they've had significant system overhauls. We're also improving our unit inspection and documentation process to understand future turn better/remodel costs. Though learned the hard way, these changes will better equip us for future acquisitions, as we can now more accurately estimate the cost of running these complexes with years of our data.
The combination of what we have been doing well and what we have learned to improve will continue to support our ongoing success in this business, which will benefit JB2 and our investors.