When you’re looking to improve your real estate investing business, how do you determine what’s working and what’s not? We all have parts of our business plan that could use some streamlining, while other parts of the business plan are working great and don’t need to be improved. Where should you be making improvements and where should you stay the course? KPIs can help you answer this question. If you want more success in your real estate investments, keep reading!
What are KPIs?
KPI stands for Key Performance Indicator. A KPI is a measurable value that shows your performance, allowing you to determine whether you’re achieving your business objectives or not. KPIs are used in a wide variety of business settings to help departments (or organizations as a whole) optimize their practices.
Basically, KPIs help you monitor your business and allow you to find better, faster, or cheaper ways of doing things. Optimizing and fine-tuning all these little details will help you maximize your return on investment—and who doesn’t want that?
The longer you use KPIs, the more helpful data you will collect and the more you can continue to learn, grow, and improve your real estate business!
How to Develop Great KPIs
Think of an attainable goal that is important to your REI business. Give yourself a time frame to meet that goal. Make it specific and detailed. Then, ensure you can actually measure your progress toward that goal.
Examples of KPIs for Real Estate Investors and Property Managers
All of these examples are things you can track and optimize if necessary:
- Maintenance request response time
- Occupancy/vacancy rates
- Average days to lease
- Turnover rate
- Rent-ready/turnover costs
- Repair and maintenance costs
- Outstanding debt
- Rental arrears
- Number of leads found
- Number of properties acquired
- Average rent
- Tenant satisfaction (for this to work, you need to conduct tenant satisfaction surveys)
- Number of mid-lease property inspections
- Cost per square foot to value per square foot
- Revenue growth
How to Keep Track of KPIs
There are two main ways to keep track of KPIs: dedicated KPI software, or Microsoft Excel.
KPI software—There is a multitude of KPI software out there that can give you a great visual representation of all your different metrics. It can help guide you as you create, manage, and analyze data from your KPIs. Once you have everything set up, it will show you a dashboard with charts, graphs, and numbers that will let you check your performance indicators at a glance. KPI software is readily available if you search online. It will cost you money, but it can also save you time and stress, especially if you aren’t particularly adept with spreadsheets.
Microsoft Excel templates—Do you have Microsoft Office and a basic understanding of how to use Excel? You can save money on software and use a fancy Excel spreadsheet instead. There are free downloadable templates available that you can tweak to your needs. These templates can show your metrics in table and graph formats much like KPI software can. This might be slightly less user-friendly, but it’s not too hard.