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Property CAPEX: Friend or Foe?

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Property CAPEX: Friend or Foe?

The goal of capital expenditure (CAPEX) is to improve a property to both attract and retain tenants. Why then would any Owner not agree to completing CAPEX projects? The answer, high costs.

One item considered a necessity is general maintenance and upkeep of the roofs. Because flat roofs are associated with lower costs, it is easy to find an apartment complex where all of the buildings’ roofs are flat. However, according to BRAX Roofing, the flat roof that was installed during construction will likely end up costing new Owners in the long run due to:

Before:

After:

  1. Ponding Water – Standing water leads to serious problems such as leaks and algae growth.
  2. Debris – Remnants of leaves, branches, and other items result in blocked drains.
  3. “Alligatoring” – Roofs that have begun to crack and bubble leading to further damage to the building’s structure if not treated properly.
  4. Buckling – Because a flat roof’s membrane is one continuous sheet, shifting of the structure over time can cause the roof to buckle.
  5. Wind – Flat roofs offer less protection to the entirety of the structure from severe winds.
  6. Leaks – All of the issues above can cause flat roofs to begin leaking.
  7. Shorter Lifespan – In general, a flat roof should last at least 15 years; however, this time frame can diminish based on inclement weather or quality of materials used.

The average apartment is reportedly 861 square feet with the average price to repair the roof of that apartment varying from $1.50 – $10.00/sq. ft. Using $5 on average, it would cost $4,305 to repair or replace a single roof. If the roof in this example belongs to a community of 100 units, it is likely not the only roof requiring repair or replacement. Suddenly, a simple job has turned into a major expense.

Before:

After:

The example above paints a clear picture of why Owners approach property improvements with hesitation. Whether the work proposed is cosmetic, or an emergency, the following tips can help Owners and the operating team manage CAPEX projects effectively:

  1. Align yourself with the correct person to do the work – Collect multiple bids on the same scope of work, interview contractors, and compare/contrast the proposals.
  2. Assemble the team – All parties involved should have a clear understanding of their role and responsibility in the project.
  3. Overcommunicate – Establishing an updated schedule holds team members accountable to ensure work is progressing and gets completed on time.
  4. Establish a clear budget – All team members and contractors should understand that the budget is not a goal, butrather a necessity.
  5. Allocate time – Take time to assess work as it is completed, and what work remains.
  6. Analyze the process – If all goes well, this may be the first improvement project of many! Once the current project is completed, take time to reflect on the process and how certain aspects could have been better implemented.

References:

“Build Apartment Cost.” www.Fixr.com, www.fixr.com/costs/build-apartment

“How Much Does a Flat Roof Cost?” www.CostOwl.com, www.costowl.com/home-improvement/roof-flat-cost.html.

Matthews, Ben. “Watch Out for 7 Common Flat Roofing Problems.” www.BraxRoofing.com, 28 Dec. 2017, www.braxroofing.com/blog/watch-out-for-7-common-flat-roofing-problems.

Sullivan, Megan. “Six Keys to Effective CapEx Project Management.” www.LodgingMagazine.com, 22 July 2015, lodgingmagazine.com/six-keys-to-effective-capex-project-management/

Colin CosbyProperty CAPEX: Friend or Foe?

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