Top Performance Metrics HOA Property Managers Should Track
Just like any job or long-term career, employees are given performance metrics to ensure that their job is being performed at its ultimate best. The same principle goes for HOAs and property management companies — performance metrics such as KPIs are used to evaluate the growth and open opportunities of the community.
KPI (key performance indicators) are metrics that help manage and measure a company’s performance. Although there are all different types of KPIs, each one is unique to its own business. Before establishing your list of KPIs, start by evaluating what metrics will be most important to your business and community. Consider some of the critical factors when evaluating your most valuable KPIs:
- Strategic growth - Which KPIs will bring development to the community.
- Identify unacknowledged areas of improvement that are often suggested by the community but never addressed.
- Audience - Who will be part of the process of maintaining these KPIs? Is your team capable or experienced enough to help the company’s performance?
- Financial status - Does your HOA suffer from economic growth?
- Community involvement - Is your HOA Board of Directors or community members aware of your need to establish KPIs? If so, are they willing to help the community reach its goals?
Why are KPIs so important?
- A KPI helps a project whether your property management company is likely to reach its goals.
- KPI is considered one of the most critical performance metrics that property managers often use when evaluating their role.
- Helps in identifying open opportunities and challenges that are specific to your business.
What are the benefits of tracking KPIs?
- KPI’s help to maintain an accurate and efficient yearly budget.
- A KPI can acknowledge feedback from former clients that may have conveyed areas of improvement for the community.
- Helps by creating strategic plans on how to obtain future clients.
- KPIs can be used to create and compare different strategies within the community.
5 Performance Metrics Property Managers Should Track
1. Business development efforts
On average, property managers are known to see an average of a 10-20% turnover each year. Tracking the number of lost and acquired properties will help ensure a more effective budget for the coming year. Consider the following methods as additional ways to enhance businesses development efforts:
- Property management software - Helps to create custom reports that are helpful with assessing the company’s areas of improvement and growth.
- Example: Townsq is an HOA software application that offers HOA communities and management companies the solutions to streamline operations, customer service and obtain accurate reporting such as financials, membership, feedback, and much more.
- Feedback - Ask your clients for feedback on how to improve your property management company.
- Net operating income (NOI) - The NOI is an essential KPI — it helps track the community’s overall health.
- Compares the revenue concerning the community’s ongoing cost.
- Tracks the projected profitability of a property’s portfolio after related expenses.
- Net Operating Income = (Total Income) - (Operating Expenses)
- Income sources to consider: late fees, rent, parking, operating services such as cleaning and maintenance, etc.
- Results - If your NOI indicates that expenses exceed the community’s actual income, here is where cost and expenses may need to be evaluated and reduced.
2. Vacancy and occupancy rates
- Knowing your property’s vacancy and occupancy rates is a large part of bringing growth to a community. Depending on the condition of the overall market, rates can vary and fluctuate. “According to a RealPage Analytics blog by Chief Economist Greg Willett, occupancy is at 97.3%, 230 basis points (bps) higher than what is considered a healthy rate of 95% seen throughout the past 11 years.”
- How do I evaluate my company’s occupancy rates?
- In most cases, it is suggested to review the current year’s market rates. This should also be evaluated and compared to other KPIs, such as market rental rates in your surrounding areas.
- If you find that your company is exceeding the market average, be sure to market this to new potential clients to help increase conversion.
3. Average Arrears
One of the most challenging areas of a property management company is ensuring that tenants pay dues and rent on time. Arrears indicate financials that are owed to the property management company, which include past-due fees and rent.
- Why is arrear important?
- Arrears help track the company’s cash flow — money present in theory but are not yet availabl
- How can your company help reduce high arrears?
- Communication - Send payment reminders to tenants monthly.
- Offer an online payment option through a mobile application or community website.
- If your community already has mobile pay or a website payment option in place, consider evaluating how your tenants use it.
- Is the application mobile-friendly?
- Can tenants ask questions or provide feedback directly through email or chat?
- Is there an IT support contact available or on-call if the system may be having technical issues?
4. Client retention “churn”
Also known as churn, customer retention is considered one of the most cost-effective strategies that a property manager can implement. “Churn is a measurement that tracks the retention rate of any given business.” The higher the churn rate, the more retention rate suffers. The lower the churn rate, the more a business thrives.
- High churn rate factors
- Poor management and staff
- Not considering client feedback
- Poor communication
- The churn rate process
- Churn Rate Formula = Lost Customers / Total Customers x 100
- Step 1: Designate a time
- Step 2: Determine how many customers were acquired and how many customers were lost during that period.
- Step 3: Take the number of customers lost and divide it by the number of acquired customers.
- Example: As the property manager of a condo building, you managed 500 residents in January at the start of the year. As you enter into December, your number of residents is now 450, meaning you lost 50 residents within a 12-month timeframe.
- How to calculate the annual churn rate
- Annual Churn = (number lost/starting resident number) x 100
- Annual Churn = (50/500) x 100
- Annual Churn = .1 x 100
- Annual Churn = 10%
- Lower your churn rate tips
- Obtain feedback
- Prioritize positive feedback
- Understand your client’s value
- Improved training for community managers
5. Customer acquisition cost (CAC)
CAC is an essential part of managing your business — it provides accurate data on how much you’re actually paying on average, per new client. It also works as an important metric for determining profitability and efficiency, along with optimizing the company’s marketing funnel.
The best way to calculate your CAC
- By door
- By owner
- Both by door and owner (most recommended)
How to calculate your CAC
- Your annual sales expenses
- Your annual marketing expenses
- Number of newly acquired members (ex. HOA clients) within the desired timeframe
Tip: the salaries of your sales and marketing team should be included in your sales and marketing expenses