Property management KPIs (key performance indicators) 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.
PM KPIs can be divided into three broad categories:
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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
- Property performance KPIs: These measure the performance of the rental property that is being managed
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.
Build your KPIs with two overarching questions:
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“How do we create experiences so good residents never want to leave?”
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“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.
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.
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.
- KPI Formula: Net Income(Profitability) = Earnings - Operating Expenses
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.
- KPI Formula: LER = Gross Profit / Direct Labor Cost
3. Resident Acquisition Costs
Some may track this as “tenant acquisition costs" or customer 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.
- KPI Formula: Customer Acquisition Cost (CAC) = Total Costs of Acquiring Customers / Total Number of New Customers Acquired
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.
- KPI Formula: Average Maintenance Costs = Total Maintenance Costs / Total Number of Units
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).
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.
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.
- KPI Formula: Average Arrears = Total Amount of Overdue Payments / Total Number of Tenants
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.
- KPI Formula: Occupancy Rate (%) = (Number of Occupied Units / Total Number of Units) x 100
- KPI Formula: Vacancy Rate (%) = (Number of Vacant Units / Total Number of Units) x 100
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.
- KPI Formula: Maintenance Request Response Time = Total Time Taken to Response of Requests / Total Number of Requests (this gives you an average overall)
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.
- KPI Formula: Track the total # of properties at the start and end of a period. Subtract Properties Lost from Properties Acquired.
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.
- KPI Formula: Average Time to Lease = Total Days on Market for All Properties / Total Number of Leased Properties (during the same period)
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.
- KPI Formula: Revenue Per Unit = Total Revenue / Total Number of Units
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.
- KPI Formula: Unit Churn Rate = (Number of Units Vacated / Total Number of Units) x 100
12. Ratio of Customer Acquisition Cost (CAC) to Lifetime Value (LTV) of a Client
The Ratio of Customer Acquisition Cost (CAC) to Lifetime Value (LTV) of a Client is a crucial metric in property management and business, as it evaluates the cost-effectiveness of acquiring new clients relative to the value they bring over time.
Nothing feels better than letting a bad client go. This metric can help you put numbers behind that decision and helps property management companies understand the long-term financial impact of their marketing and sales strategies.
- Customer Acquisition Cost (CAC) is a key metric for any business dealing with clients and customers. This is the total cost of acquiring a new client, including marketing and sales expenses. It’s calculated over a specific period, and you can use the following formula: CAC = Total Cost of Sales and Marketing / Number of New Clients Acquired.
- Customer Lifetime Value is another common metric in business, and it’s calculated by adding up the total revenue you expect to earn from a client throughout their relationship with your business. You can calculate it as LTV = Average Revenue Per Client x Average Client Lifespan.
A lower ratio between these two indicates a more cost-effective client acquisition strategy relative to the value the clients bring. Typically, a healthy CAC to LTV ratio would be below 1, indicating that the lifetime value of the client is higher than the cost to acquire them.
- KPI Formula: CAC to LTV Ratio = Customer Acquisition Cost / Lifetime Value of a Client
13. Executed Renewals
This is a measure of how many lease renewals have been successfully completed within a specific time frame. This will help you understand your tenant retention rates and the stability of your income.
A high number of renewals is the goal since reducing turnover can help cut costs and improve income and revenue. A low number of renewals could be a signal that resident satisfaction is on the decline or issues with property conditions, market competitiveness, etc.
- KPI Formula: Executed Renewals = Total Number of Renewed Leases within a Given Period
14. First Call Resolution & Number of Unanswered Calls
The "First Call Resolution" KPI is essential in property management as it measures the efficiency and effectiveness of your customer service team in resolving tenants' or clients' issues during the first interaction. This metric indicates the quality of service and the ability to address concerns promptly.
Essentially, you’re tracking how effective your team is at resolving an issue right away – or escalating it to the right person or process.
You can also track the number of unanswered calls that come to your team to know if too many are getting missed. If you track days and times of unanswered calls, you can better understand where your team may have gaps or how to communicate to residents and clients the best way to contact your team.
- KPI Formula: First Call Resolution Rate = (Number of Issues Resolved on First Call / Total Number of Calls) x 100
15. Average Hold Time
Average Hold time is a common KPI in any customer service or customer management role – but is just as important in property management. The metric helps assess the efficiency of your team’s call handling and refers to the average length of time callers are put on hold before speaking to someone.
Longer hold times, as we all have experienced ourselves, generally lead to frustration and dissatisfaction, while shorter hold times can indicate your team is more efficient with service and your residents are happier. Reducing AHT is key to boosting resident experience and operational efficiency.
- KPI Formula: Average Hold Time (AHT) = Total Time Callers are on Hold / Total Number of Calls
16. Number of Overdue Tasks
This KPI is critical for tracking the effectiveness and productivity of your team members. It tracks how any scheduled tasks or maintenance jobs are past their due date.
Prioritizing this metric helps ensure that your team is tracking tasks in a way that drives efficiency and resident satisfaction. Obviously, a high number of overdue tasks can indicate workflow bottlenecks, staffing issues, or inefficiencies in task management.
If this number is increasing, it’s a red flag (or maybe a beige flag?) that you should open up the hood and evaluate your operational effectiveness.
- KPI Formula: Total Tasks Scheduled - Total Tasks Complete on Time (it’s key to track deadlines for tasks)
17. Average # of Units Per Client
While most SFR property managers work with clients who have one or two properties at most, you may want to consider this if you have any multifamily units or clients with a uniquely high number of units.
The average # of units per client can help guide your business strategies and service offerings. It can also help you identify if your business is niche-ing down in the right direction. What kind of client do you want to work with?
- KPI Formula: Average Numbers of Units per Client = Total Number of Units Managed / Total Number of Clients
18. Average Google Review Rating
While residents in single-family homes aren’t a great referral source, their reviews of your company can go a long way toward building your reputation and bringing you to the attention of new clients. Google reviews are a great way to track how your reputation is faring in your area.
It may feel like moving this average up is out of your control, but you can influence it if you don’t like the direction it’s going. First of all, the baseline is to provide excellent service and resident benefits to boost your resident satisfaction. But beyond that, you can also give perks for filling out a review, simply ask good residents if they’re willing to give you a rating, etc.
- KPI Formula: Total Sum of Review Ratings / Total Number of Reviews
19. Number of Tenant Delinquencies
This metric tracks how many of your residents are behind on their payments. It’s crucial for assessing the financial health of your rental portfolio and the effectiveness of your rent collection processes.
If the number is higher than you’d like, you should look for a few culprits. Maybe you have several residents who aren’t able to make the payments, and you need to consider being more clear in your rental requirements at the application stage or your tenant screening process. Or, maybe it’s difficult for residents to figure out how to pay, and your payment system needs an update.
- KPI Formula: Ensure your property management system tracks the total number of tenants with overdue rent payments
20. Client Net Promoter Score (NPS)
In SFR property management, residents don’t tend to make referrals, but you know who does? Clients. Your clients can be your best promoters if you’re looking to grow. And you can track how well you’re doing in that area by keeping track of your Net Promoter Score (NPS).
NPS is a widely used metric to gauge customer loyalty and satisfaction. To get it, you need to conduct a survey. Ask your clients how likely they are to recommend your property management services to others on a scale of 0-10.
Categorize responses like this:
- Promoters (score 9-10): These are your most satisfied and loyal clients, who are likely to recommend your services.
- Passives (score 7-8): Satisfied but not enthusiastic clients who are unlikely to actively promote your business.
- Detractors (score 0-6): Unhappy clients who might not only refrain from recommending you but could potentially damage your reputation through negative word-of-mouth.
Next, calculate the percentages of respondents who are promoters and detractors. Subtract the percentage of detractors from promoters: the result is your NPS.
- KPI Formula: NPS = (% of Promoters) - (% of Detractors)
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.
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April 19, 2024
