How to Use KPIs to Optimize Leasing and Retention Rates
To ensure that a business is performing satisfactorily, keeping track of key performance indicators (KPIs) such as leasing and retention strategy is essential. If a comparison of this key metric vis-à-vis the competition shows that you are lagging, then it is time to fine-tune the strategy. A good management team will pay close attention to such metrics and take corrective action as soon as it becomes apparent that you are not a market leader, striving to be the trendsetters rather than followers.
KPIs give a quantifiable metric to measure if the set business objectives of a multifamily unit are being achieved. By paying close attention to KPI, a management team can take corrective action, if needed, to see that the multifamily property gets a stream of steady leads and to ensure that residents are satisfied with the various amenities available.
Every business has a set of variables unique to it. Therefore, blindly follow the industry KPIs may not work and at the end of the day, you will wonder what you did wrong. To ensure the KPI of each multifamily unit works as intended, the management team must assess the various relevant factors in the property and set its own KPIs. There are a few performance indicators that are common to all multifamily units and serve as the basic building blocks of a good KPI strategy.
Occupancy and Vacancy Inputs
One of the key performance indicators a management team must track is the rate of occupancy and vacancy in the property. The higher the occupancy, the better the bottom line will be. Due to the downturn in the economy, many property managers are grappling with the problem of apartments remaining empty for longer than average.
Due to this, it is paramount that every lead is turned into a lease. One strategy to keep track is to use an analytics dashboard, which will let the manager track vacancies in real-time and ensure that the business strategy is fine-tuned to increase the average occupancy rate.
Average Number of Days to Lease Empty Apartments
The length of time an apartment remains vacant before being leased again is a key performance indicator in the multifamily industry. By keeping track of the length of time the apartment is empty, the management team can calculate the cost of the vacancy. No management team wants a lot of empty apartments as a part of its track record. The moment they find out the number of vacancies is greater than the long-term average, they can take corrective action in their leasing strategy. For example, they can come up with added incentives for signing a lease or renewing it. There are a number of ways the management team can sweeten the deal to entice leads to sign on the dotted line.
Minimizing Resident Turnover
It is a fact in every industry that retaining an old customer is far less costly than signing a new one. Even if a single apartment is vacant, the marketing cost, preparing an apartment for lease, etc., will cost thousands of dollars per month. If this is multiplied over many empty apartments, the cost can be considerable indeed.
Resident turnover is a KPI a management team can use to measure and minimize the cost of keeping empty apartments in the complex. Using this metric, they can analyze whether it is a long-term resident who is vacating the place, or if is it a short-term resident who is not renewing their lease. Once this information is with the management team, they can figure out the reasons for such lessees leaving and can take countermeasures to plug the leak. It is a very important performance indicator.
By keeping a constant tab on KPIs, property managers can get an idea as to what has to be done to improve any problematic performance indicator. In the short term, the implementation of KPIs may add to a management team’s workload, but if attention is paid to KPIs diligently, they are a valuable tool to have at their fingertips. KPIs can help them improve the performance of the property in terms of amenities and improvements, as well as in improving the bottom line of the balance sheet.
About the Author:
Veena Jetti is the founding partner of Vive Funds, a unique commercial real estate firm that specializes in curating conservative opportunities for investors.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.