Being aware of how your company is performing is vital for property management. The fragmented nature of the industry means that landlords and property managers cannot afford to let go of the reins.
So what metrics do you need to keep an eye on? What are the key performance indicators (KPIs) which can be established to monitor the performance of your property portfolio?
1. Vacancy levels
The ability to make the right decisions must be informed by keeping track of occupancy levels. Take a look at how the figures are stacking up. Often, landlords and property managers must increase expenditure in order to reap the financial gains of maximum occupancy. For example, a landlord might choose to dedicate more resources towards marketing their properties wisely, expenditure which will be more than recouped through higher levels of occupancy.
READ: How To Attract Ready-To-Buy Landlords To Your Website: A Guide For Property Management Companies
Marketing, however, must be done in a way that will appeal to specific tenant markets. Advertisements, signage, social media: each method works best for a particular kind of tenant, so work out how to reach them effectively. Sometimes, a little push, in the way of incentives for those who sign a contract, for example, is a great way to entice new tenants to your properties.
2. Assessing rent levels
How does the rent you’re charging compare to other rental properties in the area?
The average rent metric is not to be underestimated and can mean the difference between keeping hold of good tenants or losing them to more effectively priced competitors.
Regularly analyse and compare your average rent against that of other, comparable, local properties. It may be that you are charging too much, but more often than not, landlords find that they are undercharging in a climate where rental costs are rising.
Make sure that the amount you are charging covers your costs of managing a tenancy. It may sound obvious, but if there is no meaningful profit then it may be time to consider raising rent charge. Build a report to help inform you of how you are performing in this regard.
3. Repairs and maintenance
Repairs and maintenance can make up a significant proportion of the cost of property management. Usually, however, there are areas for significant costs to be saved. Landlords should cast a critical eye on all repair and maintenance costs: are there aspects which can be optimised?
It can be time-consuming to shop around for tradespeople and compare prices on what different repairs should cost. That’s why most landlords and property managers tend to have a long-term database of go-to contacts who they know and trust. But that’s not always the most cost-effective method, and revenue could be improved by investing time in thorough research.
With Re-Leased, for example, you can:
- Grant tradespeople access to see the details of a job requirement
- Request quotes from several suppliers at the same time
- Keep a full record of a tradesperson’s contact info, work history, and communications
4. Keep on top of tenancy schedules
How many paying tenants do you have? When are their tenancies due to expire? Are they on rolling leases, or set for a renewal? A tenancy schedule report, detailing this (and additional) information will help you to build an accurate picture of the tenancies and their terms.
Having a system of alerts tied to this report will help you keep track of when, for instance, a rent review is coming up, as well as other key events which require your attention throughout the tenancy.
5. Arrears and cash flow
It goes without saying that having a bunch of rental arrears owed to you by tenants will seriously impact your cash flow. Minimising these arrears and keeping on top of collections should be a priority. If you’re paid a percentage of collected revenue (as opposed to a flat monthly fee), it’s even more important.
Individual landlords and property managers should have their performance assessed, monitoring arrears is a crucial part of this. For companies, ascertaining who is performing best at collecting arrears and which managers are struggling, is key efficiency data.
Clear, visible reports on how far back these arrears go will help you to monitor where the focus of your efforts should lie. Which arrears can reasonably be written off (if any)? When do you need to call in the debt collectors?
6. Outgoings: actuals vs. budget
As a property manager, the chances are that you already closely track the revenue being generated from leases. But it doesn’t end here. You should also be evaluating revenue from other income streams, such as storage fees, internet usage, parking space leases, water bills, on-site community space rental, and so on.
With Re-Leased when you have a yearly budget and operating expenses set up for each tenant, reconciliation is easy. If you find you’ve undercharged, you can generate a one-click invoice to cover the difference based on actuals.
7. Management fees
Depending on the level of service provided, property management fees account for between 8-12% of monthly revenue. Keep tabs on what your competitors are charging in order to work out how your own fees compare.
Are you discounting your services too heavily? If you had an initial discount period at the beginning, make sure you raise those prices after the discount period has expired.
If you start using new tools or technology to improve ROI, have the confidence to raise your prices accordingly. Always beware of overcharging, particularly if tenants are reporting any decline in the level of service you’re providing.
8. Profit and loss
Profit and loss statements are required, but they are also incredibly useful to help you understand your net income to inform your decision-making processes.
The statement will demonstrate the revenue and expenses based on invoices entered rather than for payments processed. From this, you can ascertain whether you are profiting enough to justify any renovations, growth or expansion that you may be considering.
9. Revenue growth
You may be watching your occupancy levels, but are you paying attention to the actual revenue yield?
Monitoring your revenue growth will show you precisely how your business is performing year-on-year. Where are you doing well, and what could be improved? This critical thinking is important.
Don’t forget to also implement a forecasting report. This will show you how much you can expect in income over a given period, calculating the values based on expected rent from all future leases.
10. Property analysis
In order to gain a thorough overview of your portfolio performance (and, indeed, your entire business as a whole), you’ll need to put together an analysis report of the property, detailing areas including price paid, rent amounts, property value, and a WALT or WALE calculation.
Wait! What on earth is a WALT? A WALT (weighted average lease term) or a WALE (weighted average lease expiry), a term widely used by banks, valuers, and commercial property investors, measures the average period to expiration for all leases within an individual property. It is a vital metric for commercial property owners when ascertaining vacancy risks and alerting owners to the likelihood of upcoming vacancy.
Measuring KPIs easily
Understanding your KPIs is incredibly easy with Re-Leased. We offer over 30 key reports covering all of the above KPIs and metrics, as well as:
- Live reporting for drilling down into information on current status of tasks, whether individually or across an entire team
- Insights into property or tenancy performance, or that of property managers or companies themselves, with advanced reports.
- Our KPI report, for example, tells you all the aspects to be monitored in order to ensure you’re running a well-oiled machine. This report allows you the ability to compare two periods against one another in order to monitor all of your key information
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