Property management KPIs are critical, quantifiable metrics that measure your PMC’s performance over time and help you evaluate the success of your objectives, projects, or team members.
In property management, getting the right KPIs in place – and committing to tracking them – sets professional PMCs apart from amateur PMs and hobbyist landlords. We’ve seen rousing debates between professional PMs on which KPIs are the most important, how they should be tracked, and where they fall short.
So today, we’re curating all of that energetic debate and summarizing a few of the most important property management KPIs that every property manager should track – and why KPIs alone isn’t a magic bullet.
Key Learning Objectives:
- The three broad categories of property management KPIs
- The two overarching questions to ask as you build your KPIs
Meet the Experts: Matthew Tringali, CEO of BetterWho, and Daniel Craig, CEO of ProfitCoach
Matthew and Daniel are both experts in their respective fields, helping PMCs drive greater productivity and profits. We asked Matthew and Daniel to share insights and help us review the most important things to know about property management KPIs.
What are property management KPIs?
Most of us are very familiar with the term “KPIs.” KPI stands for key performance indicators, and in business, KPIs are the metrics by which you measure your performance over time. Always strictly quantifiable, KPIs help you evaluate the success of various projects, teams, or objectives.
Property management KPIs help your property management business measure performance year over year and against your competition. PM KPIs can be divided into three broad categories, financial performance KPIs (these measure the financial performance the the property management company), operational performance KPIs (these measure the effectiveness of the property management company’s operations), and property performance KPIs (these measure the performance of the property that is being managed).
Particularly for single-family rental (SFR) property management, KPIs are critical to keeping track of properties, teams, residents, and investors that can be spread out across a wide region. They’re a way to ensure that you’re delivering for your investors, your residents, and your team.
Property management KPIs through the lens of resident and investor experience
Ever heard of Goodhart’s Law?
“When a measure becomes a target, it ceases to be a good measure.”
Some people call this the “Cobra Effect.” In the early 1900s, the British government tried to eliminate an overpopulation of cobras in India by offering a bounty on dead cobras. But the hyper-focus on the target led to enterprising locals breeding cobras and then killing them to create income.
What are we saying? A narrow focus on KPIs isn’t a magic pill for company growth or stability. By nature, KPIs are very transactional. They tend to focus on short-term goals like maximizing rent/fees/etc. at a specific point in time. While those point-in-time metrics are critical to success, they need to be contextualized with the view of maximizing customer lifetime value.
One great definition of lifetime value is the revenue generated from a given client over the lifetime of that particular client, as well as revenue generated over the lifetime of all the clients they refer to us.
There's an old view of property management that says the way to win property management is to maximize transaction value. In other words: “How do I maximize the rent amount? How do I use application fees or tenant placement fees?”
In our podcast on what the best property managers in America do differently, our VP of Revenue, Andrew Smallwood, explained it this way:
“Instead of asking, ‘How do I maximize this for myself and cut this pie so that I get a bigger slice of it?’ the best property managers ask, ‘How do I GROW the pie so that everybody gets a bigger slice?’”
Build your KPIs with two the overarching questions:
- “How do we create experiences so good residents never want to leave?”
- “How do we create investor experiences that are so good that they generate organic referrals?”
These questions helps you to keep a “Triple Win” mindset – that we can grow the pie for ourselves, for our residents, and for our investors.
11 top property management KPIs
With that lifetime value goal in place, let’s look at how KPIs can help you get there.
Property management KPIs are critical to helping you ensure you’re covering your bases and delivering for residents and investors. When approached through the lens of resident experience and a triple win, they can be transformative for your business processes and objectives.
Without further ado, let’s dive into the top eleven property management KPIs that can help flag if your resident experience is slipping and why.
1. Net Income/Profitability
Net income and profitability (which is net income expressed as a percent of total income) is what you’re making after you subtract your operating expenses from your earnings. PMs also track “profit per unit,” so they can break down exactly how much each unit is making – or costing – them.
PMC valuations are typically done as a multiple of revenue or a multiple of EBITDA, so tracking your revenue and net income can help you keep an eye on the value of your business as a sellable asset too.
When it comes to net income, one of the leading strategies to “grow the pie” is to build opportunities for ancillary income. Ancillary income is anything outside of the core service of rent collection.
Enterprising PMs have found ways to generate more value for their investors and residents by offering supportive services like a Resident Benefits Package. With that extra value comes the opportunity to charge what it’s worth and create more net income.
Adding value to the resident experience eliminates preventable vacancy costs for investors, keeping them – and your business – happy.
2. Labor Efficiency Ratio
Labor Efficiency Ratio (LER) tracks how effectively you are deploying labor in your company. It certainly plays into improving company financial performance, but it’s also about helping your team members hit their individual goals and perform better – so they and you end up more satisfied.
According to Daniel Craig:
“LER is the most important driver of profitability. There are only two ways to increase profitability in any business: charge more for what you do, or spend less to get the job done. LER takes both aspects into consideration. There are three key levers to improving LER – we call them the three P's of LER: Pricing (how effective you are with client pricing as defined by your Revenue Per Unit), Pay (how effective you are in compensating your team), and Productivity (how effective you are in enabling a high-performing team).”
Improving LER starts with making sure you have the right people in place. Find people who embrace your core values, who believe in the triple win, and in the importance of the resident experience. Look for people with initiative who understand that proactively seeking success for others is the way to achieve success for themselves.
Matthew Tringali’s secret sauce for a better LER? Global remote team members.
Tringali says: “I used to tell people that utilizing global Remote Team Members (RTMs) can be your unfair advantage against your competition. Now I tell people that if you aren't properly leveraging global RTM's, then you are going to get left behind. Top property management companies have 65% of their direct labor comprised of global RTMs. Companies who have six or more global RTMs on their team have a 7% higher profit margin, on average, compared to companies not yet using RTMs. LER is a master KPI that captures right people, right seats, revenue, efficiency and payroll.
These type of A-players add value, nail performance metrics, and keep residents and real estate investors around.
3. Resident Acquisition Costs
Some may track this as “tenant acquisition costs.” But, again, our focus should be on the resident experience to generate value for a triple win. That’s why we call this KPI “resident acquisition costs.” Language matters!
You can calculate resident acquisition costs by totaling your annual sales and marketing budget and dividing it by the total new units you acquired in the same date range. As you track this benchmark year over year, you will see how effective your Biz Dev strategies are.
The objective of both the PM and investor is to lower acquisition costs while not sacrificing the quality of the resident match. One of the best ways to reduce the cost of resident acquisition is to focus on building an attractive experience – particularly one that attracts the best residents in the applicant pool. A resident benefits package or another value-add can draw in residents without much effort on your part.
4. Average Maintenance Costs
Tracking average maintenance costs is tricky as an SFR property manager. The properties you manage can be far apart and vary greatly in their needs and resident requirements. Plus, repair and maintenance costs are a huge chunk of expenses for PMs and investors.
One great way to build value for yourself and your investor is to take a proactive approach to maintenance. Offer services like an HVAC filter delivery subscription, comprehensive renter’s insurance, and other features of a resident benefits package.
With Second Nature’s filter delivery service, property managers saw a 38% reduction in HVAC-related ticket requests. This saves hundreds of dollars in maintenance costs a year.
For more advice on using your KPIs and data to drive value, check out this video from BetterWho featuring Ray Hespen of Property Meld.
5. Average Arrears
Every property manager’s approach to arrears is some form of: “MINIMIZE!” Arrears – otherwise known as the unpaid debt owed by residents – can have a massive effect on your company’s cash flow.
Tracking average arrears helps you see who is paying rent on time vs. who isn’t. These metrics can also include delinquency rates (paying late and how late) and eviction rates (never pays and must be removed).
The triple-win approach here is working to prevent delinquency and eviction before they happen. The best way to do that is to incentivize on-time payments and continue to add value to the resident.
Here are a few examples:
- Offering credit building as part of an RBP – reporting on-time payments to credit bureaus can have a huge impact on residents’ credit scores.
- Offering rental rewards programs through an RBP – turning rent day into rewards day.
- Identity protection – this guards the resident’s financial security and ability to pay rent.
6. Occupancy and Vacancy Rates
We all know vacant properties come at a high cost. They require upkeep and payments, but they aren’t generating any revenue. That’s why occupancy rates are one of the most important metrics that a property manager can track. Your turnover rate or average days vacant can tell you a lot about your company.
A higher occupancy rate than the market average can be a huge selling point for your property management company, signaling to potential investors that you provide a better experience for residents and, therefore, have better retention. (Or it could signal you aren’t charging enough!)
One of the best ways to drive that coveted retention is to offer experiences that residents will pay for and stay for. That means identifying services that offer long-term value, not just a fancy one-time “shiny toy.”
An example of this in the multi-family housing space is the apartment complex that invests in a $15k pool table. Sure, it’s great for tours. But 99% of the time, it isn’t used, and a pool table is never the reason someone chooses to stay in their home. Professional PMs know better and take time to think about what’s attractive in the sales process vs. what’s going to make people stay. For example, a better benefit than the pool table might be co-working phone booths so people can more easily work from home and save money.
Finding ways to add value like that in the SFR space will go a long way to boosting this metric.
7. Maintenance Request Response Time
It’s important for PMs to know how long it takes for maintenance requests to be solved. When we’re talking about resident expectations, a reasonable response time for maintenance is one of the most basic things residents need and want. When requests take too long, residents can quickly become unhappy with their experience and decide to leave.
Tracking this metric helps you understand how well your team is doing and if you need more resources to ensure timely responses.
An online maintenance request portal can help streamline this process, and an RBP with services like air filter delivery can help reduce maintenance problems in the first place.
8. Property Inventory
Property inventory is the metric tracking the number of properties you’ve acquired successfully and the number of properties lost.
It’s also important to consider whether you’re acquiring properties that really support your business. Is your team burning out? Do your investors fit with your property management niche?
One of the best ways to get more doors and keep them is to build resident experiences that are the best on the market. By offering more value than your competitors, you can attract more of the kind of business you want.
9. Average Time to Lease
Tracking the average amount of time to lease helps show the cost to your investor when a property hits the market. Property managers and investors both want to reduce the average time to lease.
The best way to do that? Build experiences that stand out. When someone sees your listing – beyond the property and rent price, do they see a different experience and set of benefits by renting from you as a professional PM? Are you offering benefits that residents will pay for and stay for?
Other things that help with this metric:
- Measure traffic and conversion from listings to showings
- Provide attractive photos, 3D or virtual images, and clear pricing, etc.
- Provide and track the availability of showing times, self vs. guided showing experience, etc.
- Track incomplete applications, qualified %, time to approve/reply, etc.
All of these impact two critical business metrics: "days on market" and "days vacant,” which are key to this KPI.
10. Revenue Per Unit
Tracking your profit goes beyond simply adding up revenue and expense. Not all revenue is created equal. Tracking revenue per unit is a key KPI to increase profitability.
Revenue per unit does just measure whether you have enough doors. It also assesses whether those doors are worth your time. What if the doors are unprofitable? According to the 2022 NARPM Financial Performance Guide, “it’s worth noting that a 10% increase in RPU can easily lead to a 100% increase in profitability.”
We’ve said this before, and we’re saying it again – the most innovative way that professional property managers are generating greater revenue for themselves is through building better experiences.
According to Eric Wetherington at PURE Property Management, “Revenue is all about providing a service.”
You can increase your RPU by adding more value that investors and residents are willing to pay for. With the right tools, you can add that value without increasing your cost too significantly. That’s where services like an RBP and other value adds translate directly into revenue growth.
11. Unit Churn
Churn is one of the leading KPIs for any business. After all, what’s the point of all your sales effort if you’re losing as much (or more) business each month as you gain?
According to NARPM’s Financial Performance Guide, “Cutting your churn rate in half will double your average lifetime revenue per unit.”
Some churn is out of your control and subject to market changes. But for the most part, churn is a direct result of customer satisfaction. PMs should find out why customers are leaving, where they would like to see improvement, etc.
And, of course, that’s where resident and investor experience comes into play. Figuring out how to make the experience so good that your best clients never feel the need to look for another manager.
How 1,000s of Property Managers are Creating Triple Wins with Savvy KPIs
Property management KPIs are critical to success in the property management industry. Tracking metrics like these eleven KPIs also set professional property managers apart from hobbyists or amateur landlords.
The key to all of it is building metrics around the idea of incredible resident experiences – all aligned in such a way that we’re creating new value. When we’re focused on driving success in that arena, the resident does better, the investor does better, and our team and talent do better.
Creating triple-win experiences for everyone involved allows a more rewarding relationship focused on lifetime value. Through value drivers like a Resident Benefits Package, property managers are building those wins across the industry.