For this KPI for Real Estate guide, we’ll discuss the specific metrics of the acquisitions and lead management process for real estate investing. We will not be discussing exit strategies like rehabbing or rentals.
“If you don’t know your numbers, you don’t know your business!” – Marcus Lemonis, The Profit
How you choose to monetize your deals depends on your preferred strategy, but first you need to acquire the contract. We’ll focus on that since it applies to all acquisitions based real estate businesses.
In order to increase the amount of deals you get under contract, you must understand how to optimize the quantifiable outcomes along each stage to getting a deal done.
Experienced business owners and real estate entrepreneurs measure and track these metrics diligently and have an intimate understanding of where the breaking points are in their sales process.
They “know their numbers,” and you will too.
If not, Marcus Lemonis, star of the CNBC hit show “The Profit,” will scoff at you in disgust:
What’s the Deal with KPIs???
The end goal is to optimize the performance of each step of your acquisitions process.
“Optimizing” means making something better, cheaper, or faster.
Better: Increase results (more leads, higher closing ratio etc.)
Cheaper: Decrease cost (decrease cost per lead etc.)
Faster: Increase speed (decrease time to close a deal)
These are all measurable outcomes and will indicate how your machine is performing.
Key Performance Indicators, or KPIs, are the numbers used to track these quantifiable results over time, which enable you to optimize each step.
What you measure, grows…or put in different terms, if you can measure it, you can optimize it by tracking it over time.
Tracking your KPI for Real Estate and actively managing the tangible elements of your acquisitions process gets you more deals.
This post will guide you through what you can control so you can maximize the number of contracts you bring to your title company.
Enjoy! You can email us at firstname.lastname@example.org to thank us later 🙂
Leads In, Deals Out
The top of your “funnel” is how many total leads are being captured and qualified as opportunities that will bring you money. The end result is a profitable deal.
Everything that happens between those two endpoints can be isolated and optimized to maximize the number of deals out.
If you want to truly be an owner you need to know how much your acquisitions department will generate in revenue for every one-dollar bill you put into lead generation.
If you can say for every one dollar of marketing dollars spent, we make $10…that’s amazing…stop reading and go spend more on marketing!
The results of using KPI for Real Estate are amplified at scale, or when you’ve got a LOT of leads coming in. You don’t want to scale marketing and pump leads into a broken machine.
To paraphrase Bill Gates, applying scale and automation to an inefficient operation will yield inefficient results.
If you’re just starting out in the real estate business looking to get your first deal done, this information doesn’t necessarily apply to you. Instead, you should focus on honing these skills and closing your first real estate transaction so you can invest into lead generation.
Only then will you be able to scale and use KPI for Real Estate to optimize your cash-generating machine.
Influencing The Numbers
Each metric has a specific set of controllable decision points that will make that number higher/lower. This influences the process at large.
We’ll highlight a few key actions you can implement for each KPI to move the numbers up or down.
The following sections will define the most relevant KPIs in your business. Each KPI will cover
the definition (equation and description)
the optimization goal
what is influencing the metric
the specific actions you can implement to optimize those numbers.
Remember…making a process better, faster, or cheaper is how you can actually change the KPIs and ultimately affect your bottom line.
Leads in>Optimize>More deals out.
KPI for Real Estate
We’ll start with more macro-level KPIs and progress toward more micro/specific sales process level KPIs. CLICK on each line below to expand it out.
Total amount of profit from deals a campaign generated/Total number of leads from that campaign.
How much is each lead worth to you averaged out?
The goal: Maximize this number.
Influenced by: This will be affected by the overall quality of your entire acquisitions system, which can be broken down into the following micro KPIs. It will vary between different campaigns, and will be the key metric in determining where to scale your marketing.
- Scale up campaigns that make you the most profit per lead!
- Focus on optimizing the micro KPIs and aligning your team around that mission
Total cost of a marketing campaign/Total deals from that campaign.
How many deals do you want per month? This will tell you what that goal will cost in lead generation expenses.
The goal: Minimize the cost.
Influenced by: The whole machine. This is affected by how well each underlying KPI is optimized, but more specifically:
- Quality of your marketing (how likely are your leads going to turn into a deal?)
- Quality of your follow-up and lead nurturing
- Quality of your negotiation skills
- Continuously optimize all underlying KPIs
- Test multiple marketing campaigns online and offline to determine which has the biggest bang for your buck
- Hire amazing negotiators
Total profit from all deals in a campaign/Total number of deals.
The goal: Increase dollar amount.
Influenced by: Deal strategy, due diligence, and negotiation primarily.
- Make lower offers
- Learn how to prime a seller to receive lower offers
- Sell for higher prices
- Learn how to create a bidding war for your wholesale deals
- Set criteria for deal strategy to determine what kinds of deals you should rehab rather than wholesale. Example: If we can make $40K on a rehab and it will take 4-6 months to complete, let’s rehab it. All other deals…wholesale
Total cost of a marketing campaign/total number of leads generated from campaign.
How much are you spending to generate a single lead?
Working backwards, using other KPIs, you can determine how many leads you need to generate in order to get a deal.
This metric will help you set the budget for how much you need to spend in order to generate the amount of leads necessary to hit that many deals.
The goal is to lower this by optimizing your marketing campaigns.
The goal: Minimize this cost.
Influenced by: The quality of your marketing and lead generation campaigns will determine how many qualified leads will come into the top of the funnel.
- Split-test your marketing campaigns online and offline. Then, invest more into the test that generated more leads for the same price. Rinse and repeat for all marketing channels in order to minimize cost per lead.
- Opt your sellers out from future mailings to lower costs of each subsequent mail drop and appear more professional. InvestorFuse does this automatically.
- Self-generate your leads, it’s cheaper, but harder. Any cost savings you’ll compensate for with the time and sweat involved, but it WILL lower this KPI.