SS287: Key Performance Metrics Every Operator Must Track

SS287: Key Performance Metrics Every Operator Must Track

Effective multifamily operations rely on tracking key metrics that enable operators to make necessary adjustments before major problems arise. In this episode, Charles discusses these critical performance metrics.

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Talking Points:

  • No matter how large or small your real estate portfolio is, investors should be tracking certain key performance metrics to maintain an accurate overview of your property’s performance. It helps operators and investors understand their assets’ trajectory and identify opportunities to improve operations.
  • 1. Financial Metrics
    • Net Operating Income: It directly determines the property’s value based on market cap rates. Every dollar saved in expenses or gained in rent directly increases asset value.
    • Economic Vacancy: Unlike physical vacancy (empty units), economic vacancy measures the income you are losing. It accounts for physical vacancy, model units, staff units, bad debt (unpaid rent), and concessions (e.g., “one month free”). Additionally, physical occupancy is something you want to keep an eye on if you are looking to buy, sell, or refinance a property.
  • 2. Operations and Leasing
    • Tenant Turnover Rate: The percentage of tenants who move out at the end of their lease. Keeping this as low as possible and consistently reducing it will go straight to your bottom line. If you want to learn the true cost of tenant turnover, check out episode SS237.
    • Lease Renewal Rate: The inverse of turnover. It tracks the percentage of expiring leases that sign a renewal. High renewal rates mean you are providing excellent customer service and maintaining your cash flow by avoiding make-ready costs.
    • Average Days to Turn (Turn Time): The number of days it takes from a tenant moving out to the unit being “rent-ready” for the next occupant.
    • Maintenance Ticket Resolution Time: The average time it takes for the maintenance team to resolve a maintenance ticket. A long maintenance resolution time is an early indicator of potential higher turnover and a lower lease renewal rate.
  • 3. Marketing. Marketing KPIs are more important for operators and investors with consistent marketing and larger portfolios, but apartment owners of all sizes should be tracking them.
    • Traffic-to-Lease Rate: Out of everyone who tours the property, how many actually sign a lease? If this ratio is very low, there is a mismatch between the unit marketing and the actual unit.
    • Cost Per Lease: It’s the total marketing spend divided by the number of new leases signed. Are your current marketing channels effective, and where should you reallocate your budget going forward?
  • Most larger operators are tracking these metrics already through their investor and property management software. For smaller investors, it is smart to start tracking them at least quarterly or monthly. The more you track and review these KPIs, the easier it is to spot potential issues before they become larger problems. Instead of comparing my numbers to industry averages, we prefer to compare them to our previous months to see the trend.

Transcript:

SS287: Key Performance Metrics Every Operator Must Track

Charles (00:00):
What if your property is fully occupied, but the numbers are quietly telling a different story? This is where many investors get caught. They track rent and vacancy, but miss the deeper metrics that show whether the property is actually performing.

Welcome to Strategy Saturday. I’m Charles Carillo, and today we’re discussing key performance metrics every operator must track. Let’s get started.

Charles (00:19):
No matter how large or small your real estate portfolio is, investors should be tracking certain key performance metrics to maintain an accurate overview of your property’s performance. It helps operators and investors understand their asset’s trajectory and identify opportunities to improve operations.

Number one is financial metrics.

Charles (00:38):
Net operating income. It directly determines the property’s value based on market cap rates. Every dollar saved in expenses or gained in rent directly increases asset value.

Economic vacancy. Unlike physical vacancy—empty units—economic vacancy measures the income you are losing. It accounts for physical vacancy, model units, staff units, bad debt, unpaid rent, and concessions; for example, one month free.

Additionally, if you’re looking to buy, sell, or refinance a property in the near future, physical occupancy is something you want to keep an eye on as well.

Charles (01:09):
Number two is operations and leasing.

Tenant turnover rate. The percentage of tenants who move out at the end of their lease. Keeping this as low as possible and consistently reducing it will go straight to your bottom line. If you want to learn the true cost of tenant turnover, check out episode SS237. That’s SS237.

Lease renewal rate. The inverse of turnover, it tracks the percentage of expiring leases that sign a renewal. High renewal rates mean you are providing excellent customer service and maintaining your cash flow by avoiding make-ready costs.

Average days to turn—turn time. The number of days it takes from a tenant moving out to the unit being rent-ready for the next occupant.

Maintenance ticket resolution time. The average time it takes for the maintenance team to resolve a maintenance ticket. A long maintenance-resolution time is an early indicator of potential higher turnover and a lower lease-renewal rate.

Charles (01:58):
Number three: marketing.

Marketing KPIs are more important for operators and investors with consistent marketing and larger portfolios, but apartment owners of all sizes should be tracking them.

Traffic-to-lease rate. Out of everyone who tours the property, how many actually sign a lease? If this ratio is very low, there is a mismatch between the unit marketing and the actual unit.

Cost per lease. It’s the total marketing spend divided by the number of new leases signed. Are your current marketing channels effective, and where should you reallocate your budget going forward?

Charles (02:28):
Most larger operators are tracking these metrics already through their investor and property-management software. For smaller investors, it’s smart to start tracking them at least quarterly or monthly.

The more you track and review these KPIs, the easier it is to spot potential issues before they become larger problems. Instead of comparing my numbers to industry averages, we prefer to compare them to our previous months to see the trend.

Charles (02:49):
I hope you enjoyed. Please remember to rate, review, subscribe, and send me comments and potential show topics at globalinvestorspodcast.com.

If you’re interested in actively investing in multifamily real estate, go to syndicationsuperstars.com and join the waitlist for our one-on-one mentoring program. Again, that’s syndicationsuperstars.com.

Look forward to another episode next week. See you then.

Links Mentioned In The Episode:

  • SS237: What Is the Cost of Tenant Turnover

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