Every multifamily executive knows that when it comes to analyzing property performance, they need to look beyond the basics like vacancy rates, lead generation, and operating costs.

Conducting an accurate assessment of how well a property is performing demands in-depth investigation into multiple metrics and data streams to establish an accurate overall snapshot of both current conditions, and the long-term potential for future opportunities.

The real challenge in evaluating property performance lies in the analytics - finding the right metrics, knowing how to weight their values, and understanding how to implement meaningful changes where necessary.

Measure Performance With RPU

Revenue per unit (RPU) gathers historical performance data directly from the property management systems of participating apartment communities. From there, the data provides apartment owner/operators with a consistent and standardized means to compare the achieved revenues of their communities against those of other properties in their markets.

Using RPU as a performance metric provides a unique benchmark for owner/operators. Most apartment companies today use a wide array of data sources, including secret shops, REIT filings and even calls to competitors in an effort to benchmark the performance of their communities against competitors.

One challenge to this is that some of this information is gathered based on asking rents rather than collected rents. This current method also relies on manual data entry and phone calls, resulting in a greater chance of potential errors and discrepancies.

Asking rents often differ from what communities actually collect from residents. Additionally, this methodology doesn't account for the rent growth associated with renewals, leaving owner/operators largely in the dark about how their assets' actual revenue generation stacks up against their closest competitors.

Revenue Per Unit  (RPU) is a great metric, particularly when compared to the market since it provides the best benchmark for true, real-time performance.

However, it needs to be viewed in the proper context in regard to asset management:

• Generally speaking, while it’s good practice to measure year-over-year, this means that the comparison is skewed based solely on what happened last year.

• Since RPU provides a snapshot of current performance relative to the market, in times when the market is performing poorly, simply 'beating the market' doesn't mean you're actually maximizing the revenue potential of your property.

Early Warning Signals Tell The Real Story

When trying to evaluate whether a specific property is underperforming, we need to assess the various factors that impact rental rates, lead effectiveness, and renewal percentages. When viewed independently, these metrics can either give an artificially positive or negative impression of property performance, leasing teams, and portfolio managers - creating a skewed report that can hurt long-term performance.

One well-known aspect is that apartment buildings are location-bound – hence why metrics that compare search volumes to the overall localized market can deliver an accurate snapshot of property performance relative to the competition.

Leasing Performance Metrics Matter

When multifamily operators equate negative performance issues directly to rental rates, they’re likely overlooking valuable metrics that can reveal hidden opportunities for recovery and growth. Achieving the best possible ROI on a property requires optimization of all the factors impacting revenue, including leasing performance, marketing effectiveness, and customer service.

Metrics such as call coverage, a new, high-level metric that tracks and evaluates leasing calls, can provide insight into conversion rates and lead generation optimization, delivering tangible, actionable data that can be used to quickly optimize performance of a property.

Evaluation of the effectiveness of ad sources can also identify mismanaged ad sources, providing revenue managers with the information that's needed to shift ad sources towards marketing streams that deliver optimal returns.

Service Issues Impact Performance

While service issues can be challenging to track and analyze, it's important to acknowledge the significant impact that customer service has when it comes to the performance of a multifamily property. Attracting and retaining ideal renters often comes down to the reputation of a property and the ability of the management team to deliver premium service in exchange for rents that are at the high end of the market.

One way to evaluate the relationship between service and performance is by tracking renewal percentages - if renewal acceptance rates are flat or declining, it's time to take a closer look at why tenants are opting to leave.

Assessing The 'Big Picture'

While individual metrics are valuable and essential pieces of information in asset management, the real key to optimizing property performance lies in understanding how to evaluate each metric in the context of both current, and future, value.