By: Gregg Cohen, CEO
Over the past 9+ years, JWB has served over 400 clients, who come to us from 37 states and 12 countries, by building their rental property portfolios and creating passive income. That kind of sample size allows us to gain insight into our clients’ buying patterns and learn what really is important when it comes to their passive income.
One of the most important statistics to us is the percentage of our clients that have purchased more than one property with JWB. Repeat purchases mean two things to me: first, our clients are happy with their previous experience and, second, we have earned their trust. So how do we stack up? 64% of our clients own more than one house with us. Our average client owns 2.24 houses. Keep in mind that this includes many clients who have just come onboard this year and are on an annual buying plan. This tells me that we’re doing something right!
To be quite honest, the model to increase our repeat purchases is pretty simple. It all comes down to keeping our maintenance and vacancy costs low. If we can keep those costs below the expectations that are laid out at the beginning of the purchase, chances are extremely high that we are going to beat our return expectations and our clients will continue to fulfill their buying plans with our team. This is why reducing maintenance and vacancy costs is the number one focus for our property management team.
I’d like to share a few examples of new measures we have rolled out over the past year to continue to drive down maintenance and vacancy costs for our clients.
Most maintenance costs happen to owners when a resident moves out and the property must be renovated again so it will rent out again quickly. When analyzing the biggest driver of those maintenance costs, the cost to replace carpet in the living areas made up the largest percentage of those costs. On average, it easily will cost $1,000 to replace carpet and it is very unlikely that it can be saved if a tenant has been living there for multiple years.
Of course, carpet is much less expensive to install than a hard surface which is why the majority of rental property owners opt for carpet. However, we saw this as an opportunity to significantly drive down maintenance costs for our owners in the long run. The vast majority of our rental properties now come with a hard surface in the living areas (either vinyl plank flooring, tile, or hardwood.)
A hard surface means there’s a very good chance your flooring will not need to be replaced when the resident moves out. And, if there is a problem with the flooring, many times it can be replaced by replacing a single plank or tile rather than replacing the entire floor.
Looking at a recent client’s property turn costs, she was able to replace a single plank in her flooring for only $75. She saved $925 in future maintenance costs just from this change! (The flooring also looks very appealing to tenants which sets it apart from other rental properties and reduces days on market and vacancy costs.)
This additional expense costs us about $2,000 more to renovate the property on average. Of course, this is a cost we incur and it does not get passed through to the owner as all of our properties are sold at market value regardless of renovation cost.
Another opportunity we saw was to reduce the painting expenses for owners when it came time for a property turn. We researched and testing different paints styles with various vendors as an effort to increase the durability of the product. If the product needs less coats of paint when a property is being prepared for the next resident, this means significant cost savings for our clients.
Of course, testing these products in real-life conditions was a little bit of a challenge. It would take too long and be too much of a risk for us to just roll them out to our properties and wait for them to turn over in order to come to a decision. So we did the next best thing; we painted different rooms in our office with the various paints and kicked and scuffed them as much as we could for a month or so!
We found one paint to be a clear winner in our testing and we have since rolled it out to all of our projects. This too is a cost incurred by JWB on new renovation projects but we know that we all win in the long run when we reduce the maintenance costs for our clients.
JWB Construction Group, our in-house construction team, has grown tremendously over the past year and a half. 2 years ago, JWB managed roughly 15 projects a month with an average renovation cost of $30,000 for each job. Now, we managed about 45 projects a month and our average renovation costs have remained constant.
This large increase in volume is possible because we have increased the number and quality of our sub-contractor teammates who actually swing the hammers and get the hard work done on our projects. However, we also knew that we needed to set an important standard when it comes to bringing on new sub-contractor teammates. We let them know that if they wanted to receive the huge volume of business from us, they had to be willing to take on the big jobs and the small jobs and give us the same pricing for it.
This benefits you as a client because you get to benefit from the volume pricing discounts we receive as a result of JWB starting $900,000 worth of renovations each month. We instituted line item pricing a year ago or so which means that we pay one set rate for specific work to be done on a property. Because you’re a client of JWB, you get the benefit of the buying power of our entire operation which will continue to keep your maintenance costs low.
My team and I are committed to helping you achieve your passive income goals and a part of that commitment means continuous improvement in an effort to reduce maintenance and vacancy costs. I’ll continue to keep you updated in future Cash Flow Digests and on future 1-on-1 phone calls with clients on the new ways we’ve been able to save you money and increase your returns!
If you’re interested in learning more about how JWB provides passive income to clients in over 37 states and 12 countries, click here or call us at (904) 677-6777.