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Property management unit economics - the key to running a profitable business. A thread.
The basic "unit" in property management is.... a unit (AKA a door). Eg, we manage ~450 units.
Below I'll discuss Revenue per Door - what is it, how to measure it, and how to improve it.
The basic "unit" in property management is.... a unit (AKA a door). Eg, we manage ~450 units.
Below I'll discuss Revenue per Door - what is it, how to measure it, and how to improve it.
Revenue per door is just a measure of your companies gross revenue divided by the number of units under management. It's usually examined on a "by-month" basis. Typical ranges are $100 to $300 per door per month.
During the first couple years in business, ours was...not good.
During the first couple years in business, ours was...not good.
The problem with a low revenue-per-door is that it's unsustainable. You literally don't have enough dollars coming in to correctly manage every unit that you manage. Service will suffer horribly, or you'll go broke, or both. So what to do?
Revenue per door is made up of 3 components:
1) Fees paid by tenants (late fees, application fees, etc)
2) Management fees & other fees paid by owners
3) Maintenance revenue (if you have an internal maint. department)
You have to zoom in on each one individually and maximize it.
1) Fees paid by tenants (late fees, application fees, etc)
2) Management fees & other fees paid by owners
3) Maintenance revenue (if you have an internal maint. department)
You have to zoom in on each one individually and maximize it.
Tenant fees - look at increasing the application fee, adding a lease-signing admin fee, keeping late fees. Many strategies.
Mgmt fees - raise them to slightly above market, especially for existing clients. Increase lease-renewal fees. Add markup for 3rd party maint work.
Mgmt fees - raise them to slightly above market, especially for existing clients. Increase lease-renewal fees. Add markup for 3rd party maint work.
Maintenance revenue - if you don't have internal maintenance team, start one. Hire skilled handyman-type people and bill them out to your clients at 3x their W-2 wage. Keep utilization above 85%. Huge value to your clients, and a small profit center for you.
NOTE: The goal here is not to fee-max just to pad your own pocket! The goal is to create a sustainable business that can do the best job possible for your clients, your residents, and pay your employees well. Everyone wins. Your NPS score should go UP if you're doing it right.
Here's what 7 years of effort and attention to revenue-per-door looks like. You can do it too!
