If you’re a rental property owner or manager, it’s important to track rental property performance.
By doing so, you can identify potential issues early on and take steps to address them.
Additionally, tracking rental property performance can help you make informed decisions about pricing, marketing, and other aspects of your business.
3 Key Rental Property Metrics To Monitor
There are a number of ways to track rental property performance. Below are three of the most important metrics to keep an eye on.
1. Occupancy rate
This is the percentage of units that are rented out at any given time. A high occupancy rate is generally indicative of a healthy rental market. To calculate your occupancy rate, simply divide the number of units that are rented by the total number of units in your portfolio.
2. Cash flow
This is the money that’s left over after you’ve paid all of your expenses (e.g., mortgage, insurance, taxes, repairs/maintenance). Positive cash flow indicates that your rental property is profitable; negative cash flow indicates that it isn’t. To calculate your cash flow, simply subtract your total expenses from your total income.
3. Return on investment (ROI)
This is a measure of profitability that takes into account both cash flow and the upfront costs of acquiring and renovating a property. To calculate ROI, divide your annual net operating income by your total investment (i.e., purchase price plus renovation costs).
Benefits of Tracking Rental Property Performance
As a rental property owner, it is important to understand the benefits of tracking your property’s performance. Doing so can help you make informed decisions about your investment, and ultimately, maximize your return on investment. Here are three key benefits of tracking your rental property performance:
1. You’ll be able to identify trends over time
When you track your rental property performance, you’ll be able to identify trends over time and create a better real estate pro forma. This information can be helpful in a number of ways.
For example, if you notice that vacancies have been increasing steadily over the past six months, you may want to consider making some changes to your marketing strategy. On the other hand, if you see that rents have been increasing steadily, you may want to raise your rents accordingly.
Either way, trend data can be extremely helpful in making decisions about your rental property.
2. You can benchmark against other properties
Another benefit of tracking your rental property performance is that you can benchmark against other properties. This data can be extremely helpful in a number of ways.
For example, if you see that your vacancy rate is higher than average, you may want to consider making some changes to your marketing strategy or doing some additional research on the best way to fill vacancies. On the other hand, if you see that your rents are lower than average, you may want to consider raising your rents or investigating why this is the case.
In either case, benchmarking data can be extremely helpful in making decisions about your rental property.
3. You’ll have a better understanding of your expenses
Finally, when you track your rental property performance, you’ll have a better understanding of your expenses. This information can be helpful in a number of ways.
For example, if you see that your repair and maintenance costs have been increasing steadily over time, you may want to consider changing how often you schedule repairs or performing preventative maintenance on a more regular basis.
On the other hand, if you see that your utility costs have been increasing steadily over time, you may want to investigate ways to reduce these costs. In either case, having a clear understanding of your expenses can be helpful in making decisions about your rental property.
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