Essential key metrics for all property managers to gauge the success of their real estate business
What is the difference between a top real estate company and an average one? The former uses KPIs to detect which strategy is working in its favor and which areas need improvement.
Below are seven essential KPIs all property managers should track to gauge the success of their business.
1. Tenant Turnover Rate
The tenant turnover rate gives you the percentage of renters that vacate your property yearly.
Tenant Turnover Ratio= (No. of tenants that move out in a year) ÷ (Total number of tenants at the start of a year) *100
Replacing a tenant can cost you twice as much as renewing a lease. If your tenant turnover rate is unusually high, it’s time to take some corrective actions to keep the rate in check.
2. Occupancy Rate
The occupancy rate indicates the percentage of your property that is currently occupied. As a property manager, you should ensure that your occupancy rate aligns with the market occupancy rate.
Occupancy Rate= (Units rented) ÷ (Total units under management)
If your occupancy rate is dipping, you should work on detecting the reason that’s making your property less appealing.
3. Net Promoter Score (NPS)
Your business depends on your customer’s satisfaction, and NPS helps you measure the same.
Send out a survey asking your tenants how likely they are to recommend you to their family and friends. Their answer will give you an insight into their satisfaction level.
You can use a property management app to calculate the NPS.
(No. of promoters) ÷ (No. of People Surveyed)* 100= (% of promoters)
(No. of Detractors) ÷ (No. of People Surveyed) * 100 = (% of Detractors)
(% of Promoters) – (% of Detractors) = (Net Promoter Score)
4. Percentage Referral Customers
Percentage of referral customers is a key indicator of performance. It typically indicates how many customers have come from referrals and word-of-mouth marketing as compared to paid acquisition channels. Referral also indicates a high level of trust in your business amongst your customers.
Formula: (Number of referral customers/Total number of customers)*100
5. Maintenance Response Time
No one likes to wait weeks for their essential utilities to get fixed when broken. A shorter response time will keep your tenants satisfied and likely lower your tenant turnover ratio.
6. Tenant Acquisition Cost
Are you spending a lot to get a new tenant? Calculate the tenant acquisition to see how cost-effective your marketing strategy is.
Tenant Acquisition Cost = (Money Spent on Tenant Acquisition) ÷ (No. of Tenants Acquired)
Once you calculate the cost of acquiring each new tenant, decide for yourself if the money is giving you any return or just going down the drain.
7. Average Rent
This metric will help you keep track of the amount of money each of your properties brings in. Compare your average with that of the market to ensure that you’re keeping up with the pace. Your rent should be steadily increasing with the increasing property values through the years.
If you have a wide variety of properties, it’s better to have separate averages for each variety.
8. Percentage Increase in Number of Properties
The percentage increase in the number of properties helps understand the growth of the property management company. For instance, Company A has 1,240 properties, while Company B has 544 properties. Say, Company A has added 50 properties in a year, while Company B has added 100 properties. Although it seems Company A is much larger than Company B, the percentage increase in properties under management shows Company B is growing at 18.38% YoY, faster than Company A that is growing at 4.03% YoY.
Effectively tracking KPIs can be the difference between being an average company and a successful real estate business. Technology platforms like TheHouseMonk can help you track vital KPIs and manage your property better with their property management software. Try out their properties management services today.