By Altus Group | April 14, 2021

Where does your multi-family portfolio stand today? Are you positioned for future success?

You don’t know for sure unless you track how your investment is doing and compare that to how your competitors are doing. When you know where you stand, and benchmark your assets against the industry, you can find opportunities to improve.

Each property is unique, and it’s important to measure your asset’s performance against comparable “same store” properties, both in type (such as townhomes or high-rise, or Class A or B) and geography. Are your expenses in line with or higher than others? How does your vacancy rate stack up? Digging into the data allows you to see which areas you can focus on to maximize value.

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How to measure your performance and improve your cash flow using four strategies to make the most of multi-family.

From an operational viewpoint, your most important Key Performance Indicators (KPIs) are:

  • Reputation/Brand Management: Your reputation and your brand affect your ability to attract renters. Social media chatter, particularly on review sites, has a particularly strong effect on your reputation, especially among millennials.
  • Facility Management: Resident satisfaction is the driving force behind lease renewals, says J Turner Research, a Houston, Texas firm serving the multi-family industry. A building that’s clean and well-run plays a big role in tenant satisfaction.
  • Customer Service: An operations team that is responsive and active delivers the customer service that helps retain renters.
  • Vacancy Rate: The percentage of available units in your property that are unoccupied. A low rate (below 5%) is good for landlords and means rents will likely rise.

Getting the most from multi-family – How to optimize your cash flows

Your most important financial KPIs are:

  • Cash Flow: The monthly rent per unit multiplied by the number of units gives you gross monthly cash flow; subtract expenses (including property tax) for actual cash flow. Your ability to increase cash flow by charging premium rent is dictated by the building quality, the unit condition and the amenities you offer.
  • NOI % of Revenue: Net Operating Income (all revenue from property minus operating expenses) expressed as a percentage of total revenue. While it’s best to compare your asset’s performance with “like” properties, the national average in the U.S. in November 2020 was 59.3%.
  • Rent and Gross Rent Potential: The amount of rental income actually generated or that can be generated from a property based on rent from similar properties in the area (market rent), when all the units are occupied and all tenants pay all their rent.
  • Operating Expense per Unit: Expenses may include repair, maintenance, utilities, contract services, insurance, taxes, salaries and more. Compare expenses to a comparable asset, and make sure you benchmark the same expenses in terms of unit and square foot averages.

Other typical industry benchmarks

as outlined by the National Multifamily Housing Council (NMHC) in Washington, DC, are:

  • In-Place Rent Per Square Foot: Average rent per occupied square foot for all in-place leases, including both new leases and renewals.
  • Year-Over-Year Change in Revenue (per available square foot): The change from one year to the next in average effective rent per available square foot (less excluded units) on in-place leases.
  • Year-Over-Year Change in Executed Rent: The average quarterly effective rent per square foot on new leases compared to the same quarter in the previous year. Quarters are based on a rolling three-month reporting period, not the calendar or fiscal year.
  • Rent Change – Renewals: The percent change in effective rent for a renewed lease on the same unit.
  • Renewal Conversion Rate: The number of leases that renewed, divided by the number of expirations based on the lease end date. “Expirations” cover all leases that end during the period, including early move-outs, skips and evictions count. Month-to-months are included in the period once they either renew or give notice, based on the move-out date.

If you own multiple assets, it may be easier to analyze your portfolio if you hold consistent unit types. For example, you’ll be better able to compare and analyze the performance of your 10 buildings with consistent one-bedroom units than if you have fifteen (or more) different variations of the same in your database.

Getting the most from multi-family – How to optimize your cash flows

Having a good grasp of your KPIs helps you evaluate the performance of your assets and make decisions for your cash flow and the long-term health of your investment. Look at all the angles to estimate how a renovation may change your cash flow:

  • The cost of the renovation.
  • The effect of the renovation on rental uplift.
  • The effect of the renovation on your vacancy rate.
  • The length of time the units will be vacant.

Say you have a property that’s a class B or C in an area with numerous class A competitors. You decide to add value to be more competitive by putting $3,000 into every unit to upgrade the appliances. First, you need to estimate whether that value-add is worth it. What can you get for that renovated unit over time? How long does it take to get a return? How many days are units vacant while you do the upgrade, and what’s the revenue loss? What’s the sweet spot – the right amount to spend on a unit without overengineering a renovation so you never see a full return?

Know your ABCs

Class A: The highest quality. Luxury apartments in newer, upscale buildings with highest rental rates.

Class B: A step below A. Older buildings but generally well maintained. Renovations may turn a Class B into a Class A.

Class C: The lowest quality. More than 20 years old and may be located in less desirable locations or may not be well maintained.


Now that you understand your own KPIs and how your multi-family portfolio stands up to your competitors and the industry, you can look for gaps in your performance. Use your analysis to find ways to maximize your cash flow.

Gain greater visibility into your portfolio performance and get deeper insight on where to invest for the greatest return.


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