Key Metrics All Landlords Should Measure


Not everyone finds math and metrics appealing. The mere thought of formulas and abstract calculations can instil fear in practically-minded individuals. However, in an era where the profitability of traditional buy-to-let investments is being questioned, it becomes crucial for landlords to possess the necessary metrics to make informed investment decisions. Whether you are contemplating the purchase of a property or evaluating the performance of your existing portfolio, it is essential to have accurate and measurable metrics for comparison.

Landlords have access to a variety of metrics, ranging from simple occupancy rates and gross yields to more intricate calculations such as internal rates of return (IRR) and abstract capitalisation ratios. The purpose of this guide is to offer landlords a comprehensive yet accessible breakdown of the key metrics and KPIs utilised in the property investment industry. It will explain their significance and provide guidance on how to calculate them.

Assessing Rent Levels

One thing you definitely want to avoid is undervaluing or overpricing your rental property. Determining the appropriate rental rate can be a difficult task, regardless of the expenses involved.

It is crucial to have a clear understanding of how much you should charge in comparison to similar properties in the area. Striving for the average rent metric is important, as it can be the deciding factor in retaining good tenants or losing them to better offers.

To achieve this, regular analysis should be conducted to compare your property with similar ones in terms of rental rates. Often, you may discover that you are not charging enough, especially in a market that constantly fluctuates.

Profit is the driving force behind your involvement in this industry. Therefore, it is essential to ensure that your costs are covered and that you are earning enough to have some surplus after paying the mortgage and other expenses.

Arrears and Cash Flow

One of the major challenges to avoid when owning properties is facing cash flow issues and dealing with tenants who fall behind on rent, resulting in arrears which is why many speak to landlord solicitors to get a grasp of what is going on. 

If you own multiple properties and encounter arrears in many of them, it can severely impact your cash flow and potentially be detrimental to your property portfolio. Minimizing arrears and effectively managing collections should be your top priority as a landlord.

Individual landlords should assess their tracking systems and stay proactive in addressing arrears. If you are dealing with troublesome tenants and arrears, seeking legal advice from a solicitor specializing in landlord-tenant matters can be beneficial in recovering the owed money.

This is why maintaining detailed records of tenants who owe money and tracking the duration of their arrears is crucial. If this has happened to you, getting some landlord legal advice is definitely recommended.

Revenue Growth

Just as you diligently monitor occupancy levels, profits, and losses, it is equally important to keep a close eye on your revenue yield. This is crucial for year-on-year tracking and growth as it provides insights into your strengths and weaknesses.

By analyzing revenue yield, you can identify areas where you excel and areas that require improvement. This information helps you focus your efforts accordingly, allowing you to prioritize properties that are performing well and temporarily allocate less attention to others. This is where your critical thinking skills come into play.

Once you have year-on-year data, it is beneficial to create forecast sheets and reports that project your earnings for future periods. This enables you to plan ahead and make informed decisions. Additionally, these reports can indicate periods of anticipated lower activity, allowing you to prepare accordingly.

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