What we’re learning about 2024

 

We’ve already talked about why it’s important to do an end-of-year review and how you can’t get a clear picture of where you’re going unless you know where are in a column titled “It’s time to get to know your numbers.” But something I don’t think I explained well was how we interpret the data we look at, why it’s important, and why you need to share it with your team.

Here are some of the things we found while doing our review that I’d like to share with you. I’ll start with our rehabs because that was one of the groups I worked on.

 

For our rehab reviews, I’m looking at many different numbers to answer three basic questions; What did we do? What went well? What do we need to improve on?

 

What we found was that we did a total of 12 rehabs this year. This was broken down into resale rehabs for flips, initial rehabs for rentals we just purchased, and turnover rehabs where we are getting houses ready between tenants. The next thing we asked was how long it took us to do each. We found here that we are averaging 2.5 months on flips, 2 months on initial rehabs, and only nine days on turnovers.

 

Next, we asked how much each rehab cost and then divided that number by the square footage of the house to give us a price-per-square foot number. This allows us to compare the different rehabs we have and group them based off severity. Some of our flips and initial rehabs were pretty big and cost around $60 per-square foot to rehab. Consequently, that’s why it took so long to get them done. But we had one flip that only took 25 days and was at $20 per-square foot. That was an interesting one to evaluate to see how we were able to get it done so quickly and for so much less.

 

On our turnover costs, which we define as anything we have to pay from the time we miss a rent payment until we receive a new rent payment, we averaged $3,228. This includes eviction costs, holding costs like insurance and utilities, and rehab costs. That is a pretty low number and is something we have been able to accomplish by having standard materials on houses, a proactive management process with eviction and a team of guys that get it done.

 

As a matter of fact, we just had lunch with our team where went over all these stats and asked the three questions above. What we found was they were excited to know that they had done so much this year. My lead man Charles smiled and said that made him feel good because it’s so easy to just put your head down, work and never feel like you’re making any progress. All the guys appreciated us bringing it to their attention. Then we talked about what went well and key things that can help us improve for 2025.

This was great information unto itself.

 

In the office we are still working on end-of-year numbers. So far, we have worked through marketing. What we found is we’ve spent $433 a lead with direct mail and $266 dollars a lead on online marketing. But after looking at the total houses purchased this year, we only got one deal from either of those sources. All the other houses we bought in 2024 came from previous clients, word-of-mouth referrals, my real estate agent, or a wholesaler.

 

In other words, most of our active marketing produced no deals organically. Instead, knowing people, as well as having good relationships and a good reputation, has been our number one deal generator.

 

We are not through with our rental numbers though. And that’s my fault. I gave my team different metrics to find such as turnover costs (which we found), average turnover time, cashflow for the year, vacancy rate, and expense factor.

 

We have been able to ascertain that we have a vacancy rate of 3.27 percent companywide. To put that into perspective, we did not receive rent for 12 days out of the year on each property. That is important to know when figuring out your expense factor, as is on-going maintenance, which we found cost us 4.81 percent for the year. With just those two numbers we know that a little over 8 percent of each month’s rent payment has to be put aside to take care of expenses for the year. But after adding utilities, insurance and taxes, our expense factor was over 17 percent.

That’s about as far as we’ve gone with our numbers, and that’s my fault. After trying to have two different end of year review meetings, I realized I didn’t define how to find the rest of the numbers we need well in our SOP. And just as importantly, I did not define why each of these metrics was important.

 

I told you before that metrics are pieces of information that tell a story of what is going on in a business. But after hearing the confusion and the uncertainty in the numbers my team was trying to report, I realized they didn’t know the context of the numbers. And if you don’t know the context, you don’t understand the story.

 

Data means nothing if you don’t have a way to interrupt it. And since I didn’t give my team the ‘why’ behind the numbers, all they saw was formulas and spread sheets and not the meaning behind what the numbers were telling us. So, I’ll need to fix that in a hurry so we can finish up. Because until we know what we learned from 2024, we can’t start 2025.

 

Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.