Key performance indicators (KPIs) are important property management metrics that you should be tracking. But what exactly are they?
KPIs will help you keep track of and manage your property management company’s operations, in addition to its performance. They are incredibly useful to any business owner, as they can help you determine whether or not your company is on track to meet its goals.
At the end of the day, any business can benefit from a little more company structure. So if you’re looking to support your company in a way that can fuel growth, the right KPIs can help you get there. From lowering your business fees to tracking your spending, there is so much you can accomplish with KPIs.
So, if you’re curious to know more about how KPIs can help you succeed in property management, you’re in luck! In this article, we have listed nine different KPIs that you can track for your company.
1. Clients Won vs. Clients Lost
This KPI is the first and arguably most important one for your property management company to keep up with. This is because in order to remain profitable and effective, you need to keep records of and analyze your business developments, and the heart of your business’s development is your clients!
While losing a client can be hard on any company, failing to keep track of them will ultimately hurt your business even more. If you don’t know the number of clients that you currently work with, you may be overspending without even realizing it and hurting your bottom line.
By keeping track of this KPI, you will be able to keep your company succeeding.
Here are some of the benefits:
- You will have a more accurate idea of what your budget should be when it comes to the operations of your business and your client acquisition.
- You can implement a more strategic and proactive approach to acquiring new clients.
- You will be able to know exactly why a client has decided to stop working with you, and you can use this information to improve your operations for your current and future clients.
But how do you monitor this information? Tracking this KPI is fairly simple. Using an Excel spreadsheet, make a list of all your clients and include relevant information about their time with your company such as:
- How long they have been working with your company.
- What they are looking to gain by working with your company.
- How much you charge them for your work.
- What caused them to terminate their contract with you and if their original expectations were met by your team.
2. Tenant Turnover and Retention
We recommend that you always track your tenant turnover and retention, as this will help you to notice if you need to make changes regarding how you are managing the rental properties that are under your care.
Tenant turnover is bad for everyone involved. This is mainly because of the costs that come with it. The process of ending a lease and finding a new tenant requires you to spend a fair amount of time and resources including:
- Processing the turnover.
- Preparing the rental home for new residents.
- Taking care of a vacant rental home that is not earning any money.
- Marketing the property.
- Conducting thorough and effective tenant screening processes on new potential residents.
If you find that your average tenant moves out quicker than you would like, then it may be time to reevaluate your approach to managing rental properties in a few different ways.
When a property management company is experiencing high tenant turnover rates, it usually has to do with the following issues:
- Late or overdue property repairs and maintenance.
- Unresponsive property managers.
- Poor quality maintenance.
- Poorly selected tenants.
3. Days-to-Lease Average
While you may not have trouble keeping tenants around after finding them, how long does it typically take your property management company to find a new resident in order to fill a vacant rental home? If you don’t know this crucial KPI, it’s important that you begin to track it as soon as possible.
A vacant unit will cost you money with each day that passes. This is because you will still need to care for the property, you likely won’t be getting paid your typical management fee until you are collecting rent payments.
Once you start to track your days to lease average, you will have a better idea of how to minimize that average, in addition to minimizing your expenses.
For example, if you notice that a couple of specific rental units have sat vacant for a longer period of time than normal, you may want to consider changing your marketing approach for those units.
You could also change the cost of the rent or make some small visible upgrades to the home. However, if you do end up changing the price of the rent, make sure that it remains within the neighborhood’s average so you don’t end up losing money or turning away potential tenants.
4. Rent-Ready Costs
So, when you are experiencing a turnover in a property under your care, do you know exactly how much it will cost you to make sure the unit is in a condition that is ready to rent to a new tenant?
While most property management companies tend to overlook this KPI, it is an important one!
When turning over a unit, most property managers tend to use supplies that they already have on hand, like open cans of paint or previously used locks. However, many don’t bother to calculate the costs associated with the turnover.
Keep track of any cost that you incur while turning over a rental unit, including materials and labor. This will help you identify any unnecessary expenses and lower how much your company is spending without negatively impacting your other KPIs.
5. Total Revenue Data
Do you know how much your property management company is earning each month?
As any successful business owner knows, it’s a good idea to monitor your company’s revenue each month. That’s because, at the end of the day, revenue is what drives your business. Without it, your company may fall into financial difficulty faster than you anticipated.
If you notice your revenue stream increasing, that generally indicates growth and success for your company. However, if it doesn’t, this KPI can allow you to determine which changes you need to make in your company’s operations.
6. The Cost of New Clients and Properties
How much is your company spending in order to gain new clients? This KPI can help you to effectively scale your business and keep track of your spending.
It’s important to know whether or not your efforts to gain new clients are cost-effective. This KPI can also help you know how much money you should set aside in order to reach your goals regarding the growth of your property management company.
But how can you calculate this? First, calculate your total annual sales and marketing budget, and then divide that number by the amount of new rental homes that you have acquired during that time. Then, calculate the cost of customer acquisition per rental home to see how they add up year after year.
This can help you gain new insight regarding how effective your business growth techniques are, and whether there is an opportunity for improvement to help you lower those costs without missing out on new clients.
For example, if you want to take on 100 new rental properties this year and the average cost of gaining a new client is $300 per property, you will need to spend around $300,000 on marketing efforts to meet the growth goal that you previously set for your property management company for the year.
In short, if you find that you are overspending when it comes to gaining new clients for your business, there will most likely be room for improvement when it comes to how effective your marketing strategies are.
7. Property Management Fees
As a property manager, it is always important that you make sure that the cost of your services is generally in line with the average rate in the industry. This is why doing your research to find out what other property managers in your area are charging for their services can be useful, as you can compare these rates with your own fees.
It’s important to know whether your property management fees are affordable or if they are warding off potential new clients who may think that you are charging too much compared to other property management companies. Alternatively, you may also find out that you have been under-charging your clients for your services.
Offering your services at a discounted rate isn’t always a bad thing. However, it’s important to make sure that your lower rates aren’t getting in the way of your company’s financial health and operational needs.
If you want to raise the cost of your service, improving your work by using new technology is more than enough reason to do so. Always remember that your company can only provide clients with high-quality property management services if you are earning enough revenue to do so.
8. Repairs and Maintenance Costs
Many rental property owners and managers cite repairs and maintenance to be one of the biggest rental property expenses that they have to face. That’s why it is crucial that you monitor how much your company is spending in this area.
While it’s important to make sure that the rental properties under your care are always in top condition, how often do you shop around to determine the best price? How many times have you had an appliance replaced when it could have simply been repaired?
By keeping track of how much your company spends annually on repairs and maintenance, you’ll be able to analyze how much of those expenses are necessary and which ones you can lower without impacting your tenant’s comfort in the unit.
9. Revenue Growth
Tracking the growth of your company’s revenue is a good way to determine how your business has been performing each year. This KPI can paint an accurate picture of whether your property management company is performing well, or if there are areas for improvement that you can work on.
You can use the other KPIs listed above to determine how your company can improve in greater detail. For example, if your revenue has declined in the last year, you can use KPIs to determine what may be causing the loss of income.
You may find that your rent costs haven’t kept up with inflation, or your vacancy rates are hurting the cash flow of your company, or maybe you faced a one-time cost, like moving to a new office, that set the company back a bit.
Regardless of the reason, tracking your revenue growth over time will help any property manager understand their business a little better.
Bottom Line: KPI for Property Management Companies
While managing and monitoring your property management company’s performance data may seem like a daunting task, it is often crucial for the financial health of your business.
KPIs can help you to determine where your company has an opportunity for improvement, in addition to measuring your growth over time.
With the many benefits available, tracking KPIs for your business is a no-brainer.