A key performance indicator or KPI is a metric that helps you see how well your business performs and functions. This is especially important in the real estate industry. Whether you sell or rent property, you need to understand factors relating to your tenants and buyers as well as how efficiently your company operates.
Having a consistent evaluation process ensures that you get the profits that you need and that your business is as productive as you want. We’ll look at KPIs for real estate to give you an idea of what you can use to measure and track your success.
Keeping track of KPIs is the best way to see how your real estate business is functioning on a daily basis.
Our real estate KPI examples can be converted into scorecards where employees track the outcomes of their efforts every day. Managers can look at scorecards to see how employees are progressing with their daily activities. If there is a discrepancy, they can pick up on that before its too late! Employees have more ownership and focus when they have to continually track their progress.
Don’t wait for problems to spiral out of control. Build problem-solving and accountability into your management style.
As you look for real estate KPI examples, you’ll find that many apply to the operations of your business. This includes both networking goals and the number of visits it takes to make a sale as well as tenant turnaround figures.
Look at your networking goals first. The more you network and participate in real estate and business events, the more connections you make. Junior-level employees can use those events as a way to find people with property that they want to lease or sell and find those looking for a place to buy or rent. A good network should include at least 20 other professionals. Not only do you want a network that features buyers/renters and sellers, but it should feature mortgage brokers and agents too.
Tenant turnaround figures
Setting tenant turnaround figures as one of your real estate key performance indicators is also helpful. This refers to how long a tenant remains in a property. Those looking to rent a piece of commercial real estate want to find long-term tenants. They do not want someone who will stay for a few months and leave or someone that they may need to evict later. Showing that you have a long turnaround rate can make property owners want to work with you. Turnaround rates can include how long it takes to find buyers or sellers too. This shows prospective clients that you can help them faster than the competition can.
Number of visits or trips that it takes to make a sale
Don’t forget about the number of visits or trips that it takes to make a sale either. Think about how long it took for you to find the right building for your real estate business. Did you sign a contract for the first place you visited or did you take trips to multiple buildings before making a decision? Prospective buyers and renters want to work with agents who can find them the right options as soon as possible. If it takes weeks or even months for you to find the right piece of property, you lose money and clients may look elsewhere.
Two of the more important real estate key performance indicators that relate to sales and marketing include client communications and client feedback.
Setting communications targets ensures that you reach potential clients every week and that you form connections that can lead to higher sales. Consider setting a goal for the number of calls that you want to make each week and spreading those calls out over several days. Not only does this keep you from growing bored, but it also keeps your speech fresh and prevents you from saying the same things to each person. A call that sounds rehearsed can turn off clients. Aim for calling at least 120 prospective clients every week.
Getting the referrals that you need is possible through client feedback and therefore it’s a great real estate KPI example. When a client is happy with your services, that person is more likely to recommend your real estate business to others. You can save money on marketing because your clients use word of mouth advertising for you. If you aren’t sure how clients think of your business and services, sending surveys can help. Their responses give you a good idea of whether you met their needs and if anyone in your business needs more training.
Whether you run your real estate company primarily online or through a combo of online and offline, using conversion and bounce rates is also helpful. The bounce rate tells you how prospective clients found your website, including where they came from originally and how many remain on your site rather than go to others. Using affiliate links and blog posts with the right keywords can drive more traffic to your real estate site and keep visitors there.
Conversion rates help you see how many prospective clients choose to reach out after visiting your site. Adding a call to action to each page or article that you post encourages those clients to contact you. This is something you should have at the end of articles about leasing commercial property and posts that discuss selling real estate. A call to action can include your email address or phone number.
KPIs for real estate include performance indicators that relate to finance, of course. Although all KPIs are indirectly linked to each other through the chain of operations, finance is the one everything boils down to. You want to use a process improvement checklist to maximize your firm’s profitability and try to keep your quality above average.
Add value for your clients
Add value without spending a lot more. A good example is a discount that you offer. While you cannot offer a buy one and get one free sale for a real estate transaction, you can offer a percentage off your closing costs or fees. Showing clients that they can save money when they choose you can help you land a sale. Value can also include some type of gift such as pens and water bottles that display your company name and logo or address. Even offering a great service is valuable to clients, so going the extra mile to ensure a home is clean, for example, is important.
Cross-selling is something else that you can do in the real estate industry. When you buy a house, you have the option of adding a home warranty that covers the cost of appliance repairs and services. Partnering with warranty companies allows you to offer a good warranty to your clients for a lower price. You might partner with a company that offers rental insurance too. Rental insurance covers damage done to the property during storms and other situations, as well as theft. Clients may not realize that they need these services until they work with you.
Average customer lifetime value
Looking at the average customer lifetime value is another of the KPIs for real estate that we recommend. This tells you the average amount of profit that you make off each customer. Take into account the money that you spend on marketing and meetings as well as your overhead costs. Subtract that amount from the money that you made from the sale or lease of the property to get your net profit. The more profit that you make off each customer, the more money you put back in your pocket. If you find that you spend too much on office supplies or other things that you need, try negotiating with your suppliers to lower those costs.
Watch the Competition
You can also use KPIs to track how you’re measuring up to the competition. Not only do you see where you need more work, but you’ll identify the areas where you rank highly and find what services you offer that appeal to prospective clients. Whether you handle the renting/leasing or buying/selling of commercial real estate, you need to use KPIs to make sure that you are on top of your game.
Contact Fusion CPA to see how we can help you identify and measure the top real estate key performance indicators for your firm.