83. 3 Metrics Every Landlord Needs to Track

Want to be proactive and not reactive? Then you gotta have a lay of the land! Because if you don’t know what you’re working with, then it’s really hard to make smart investing and management decisions to move forward and scale easier.

IN THIS EPISODE, WE’LL CHAT ABOUT:

The management mindset I carry over from my other businesses to my rentals
The power of tracking KPIs in your rental business
The CEO step you have to take after auditing your rentals

If you’d like a shoutout (and a chance to win a $20 Home Depot gift card), just leave a review on Apple Podcasts and send a screenshot of it to me on Instagram via DMs!

The management mindset I carry over from my other businesses to my rentals

In Rental Business, we want to be tracking and scrutinizing and yes measuring metrics that actually matter. Because doing busy work isn’t in anyone’s interest. Here are Management Mindsets I carry over to my rentals:

Data-driven approach: Emphasize tracking and analyzing expenses, capex reserves, and time spent to make informed decisions.
Focus on optimization: Strive to find ways to improve efficiency and reduce costs without compromising quality.
Proactive planning: Budget for capital expenditures by tracking the age of systems and components to anticipate repair or replacement needs.
CEO mindset: Take a strategic view, conduct after-action reviews, and make decisions based on data analysis.
Continuous improvement: Seek support, resources, and feedback to refine strategies and stay updated with industry best practices.

The power of tracking KPIs in your rental business

Tracking key performance indicators (KPIs) in my rental business is powerful because it allows me to:

Improve profitability by analyzing expenses and optimizing costs.
Plan for capital expenditures (capex) by tracking the age of systems and components.
Manage my time more effectively by identifying areas of inefficiency.
Evaluate the effectiveness of my deal sourcing strategies and make necessary adjustments.
Make data-driven decisions as the CEO of my business.
Identify opportunities for scaling and growth based on comprehensive performance data.

Tracking KPIs enables me to make informed decisions, optimize operations, and maximize profitability and growth in my rental business.

The CEO step you have to take after auditing your rentals

After auditing your rentals, the crucial step you need to take as the CEO of your business is to analyze the data and determine the next course of action. Here’s what you need to do:

Conduct an After Action Review (AAR): Take a critical look at the data collected during the audit and evaluate its implications for your rental business.
Identify Opportunities and Challenges: Analyze the data to identify areas of opportunity and potential challenges that need attention. Look for patterns, trends, and outliers in your expenses, capex reserves, and time allocation.
Develop Action Plans: Based on the insights gained from the audit, create action plans to address the identified opportunities and challenges. Determine the specific steps you need to take to capitalize on the opportunities or mitigate the challenges.
Reallocate Resources: If you discover that you have excessive capex reserves, consider reallocating those funds to other areas of your business that require investment. Assess whether the current allocation aligns with your long-term goals and adjust accordingly.
Refine Deal Strategies: If the audit reveals inefficiencies in your deal sourcing strategies, refine your approach. Evaluate whether you are targeting the right markets, accurately estimating rehab costs, or effectively negotiating deals. Make necessary adjustments to improve your deal conversion rate.
Prioritize Areas Needing Attention: Focus your energy on the areas of your business that require attention. Determine which aspects need improvement or further development and allocate resources accordingly.
Take Decisive Action: Based on the analysis of the audit data and the developed action plans, take decisive action to implement the necessary changes. Whether it’s allocating resources, refining strategies, or addressing specific challenges, commit to the actions required for improvement.

By analyzing the audit data and taking these CEO steps, you can drive your rental business forward, capitalize on opportunities, overcome challenges, and ensure continuous growth and success.

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EPISODE TRANSCRIPT:

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Bonnie Galam 0:00
 
Hey there and welcome to the good bones podcast… I’m your host Bonnie galam and this week I’m turning up the dial on the nerd meter. If you thought I geek out over the legal stuff, just wait until you hear me talk business. Which is exactly what we are gonna do today in this episode.
 
 
Taking # of LLCs I own aside, I see myself as running 3 businesses. My law firm – which is largely in hibernation right now, my rental business, and this educational business that spins on free content like this podcast and paid programs like my courses Landlord Scale School and Landlord Law School. But through 10 nearly years of entrepreneurship and about 4 1/2 years of that being full-time entrepreneurship. I’ve seen a lot, failed a lot, and realized some tried and true practices that I could carry over from business to business and ultimately create multiple 6 figure income sources.
 
 
And one of those overarching principles is the 4 step scaling process at the heart of my brand new program Landlord Scale School.
 
 
The 4 step process is designed to not just help you scale but really get your portfolio in a place where it can be scaled in the first place. And the first step of that process is to audit your exisitng business – whether that’s 1 property or dozens of properties. You gotta get a the lay of the land.
 
 
Peter Drucker, absolute management legend, and oft referenced Harvard Business Review citation, is attributed to saying “What gets measured get’s managed”
 
 
That if you’re tracking something you know how its performing and ideally have an idea of how to manage it.
 
 
Which is why Scale School kicks off with a wholeeee module on Auditing your rental business. Which may not sound sexy, unless you’re nerdy like me and spreadsheets and workbooks sound like your idea of a goodtime. BUTTT if you don’t have an idea of what’s going on in your busienss in a true quantifiable way then you’re kinda just acting off of gut instinct or emotions. And I love my using my gut to decide between options but nottt so much to come up the line up of options in the first place.
 
 
So that’s why inside of Landlord Scale School, I walk my students through 6 different Audits to really get a holistic look at not just the health of their business but also where the opportunities and next steps are.
 
 
And today I want to talk about 3 of them. Expense, capex, and time. Maybe I’ll do another episode on the other 3 audits at some point but these 3 are the ones that I’ve found make the fastest impact on my life and rental business so I wanted to dive into them here.
 
 
Plus I think it’s worth noting a flaw in Drucker’s what’s get measured get managed philosophy.
 
 
A critic of Drucker’s premise was this guy named V. F. Ridgway. Who’s criticism essentially boiled down to “What gets measured gets managed — even when it’s pointless to measure and manage it, and even if it harms the purpose of the organisation to do so”.
 
 
In english? Not everything that matters can be measured. Not everything that we can measure matters.
 
 
So we want to be tracking and scrutinizing and yes measuring metrics that actually matter. Because doing busy work isn’t in anyone’s interest.
 
 
And the 6 audits that I designed for Landlord Scale School are designed to be what’s known as KPIs. Key Performance Indicators. Things that when I track them consistently, I can instantly know the health of my business, pick up on trends, and make smarter investing and management decisions. and perhaps most importantly not a lot of leg work.
 
 
And so let’s get into starting with expenses.
 
 
Most landlords I know do their bookkeeping periodically – and by bookeeping I usually just mean categorizing their expenses inside of their quickbooks account or stessa account or excel spreadsheet. Likewherever your tracking your expenses. Because you ARE tracking your expenses right?
 
 
Well we are moving under the presumption that you are very much tracking your expenses in terms of having a dedicated space where they are all logged. But I’m also moving under the presumption that that’s all youre doing with your #s until you submit it to your accountant at the end of the year for your taxes and even then the soul goal is to minimize your tax bill and then pay whatever taxes you need to.
 
 
And that leaves SO much on the line. There’s so much data you can get from your expenses to become a more profitable landlord. Some of that is as simple as seeing how much you are spending on certain types of categories – like tech expenses, property management software, email accounts, phone #s ,etc. You can also track things repairs – what was capex, what was tenant issues, what was turnover expenses, what was initial rehab. Get granular because that’s where you’ll find the opportunities and the missed opportunities. You’ll find the patterns, the seasonal expenses, and you’ll actually be able to build a budget which is huge when it comes to the next metric you should be tracking.
 
 
The next thing investors needs to be tracking is their Capex. Sure the biggerpockets calculator told you to put 10% into reserves. But until when? Do you need 10k in that account? 100k? 1million? Does the limit even exist? I honestly don’t think most investors have thought about the relationship of their capex reserves to their portfolio. Plus – layer on the asset protection risk of leaving a ton of cash sitting in your business PLUS the opporutntiy cost of not investing cash that’s just sitting around…. and suddently that simple 10% calculation doesn’t seem to simple right?
 
 
Another piece of the capex pie that I don’t see a lot of landlords tracking is the actual age of their systems. I hear so often that investors are suprised by a sudden capex expense or didn’t make money a particular year because of a cluster of capex expenses. I’m like wait… this stuff shouldn’t be that surprising. WE know the average lifespan of a hot water heater, a roof, a HVAC system. So… are you tracking that? ARe you seeing when things are likely to need repair or replacement and then budgeting for it? Because yea there are capex surprises – floods, trees fall on properties, but most of this stuff is predictable. BEcause it ALL needs to be replaced at some point so let’s start planning for it now.
 
 
Finally is your time. I have such a love hate relationship with time tracking. AFter tracking my work in 6 minute increments as an attorney, I swore I’d never do that again. It’s a big reason why my firm was flat rate only. Buttttt as an entrepremeur, I’ve seen the value of actually tracking my time to see where I can find efficiencies and also just have a come to jesus reality check. If you have the screen time notifier on your phone that pops up weekly to let you know exactly the realtiy check feeling I’m talking about. It can truly feel like there’s no way I was on my phone THAT may hours a day but the data doesn’t lie. Same thing when it comes to your rentals. It can feel like you’re working endlessly on your investing business with nothing to show for it, but when you actually sit down and track you realize you only spent a few meaningful hours in a month moving the ball forward and instead have been stuck in the weeds. Or maybe you’re zillow scrolling under the premise of it being investing related but….. how many offers have actually come out of those hours of zillow doom scrolling?
 
 
These aren’t comfortable questions to ask yourself and reflect upon. But I’ve found that the discomfort that comes through periodic time auditing is so grossly outweighed by the benefit of not just increased producitivity but increased like life alignment that comes from re-prioritizing my time from investing, to my other businesses, to my kids, my husband, and yea this attempt of having a hobby outside of being an investor lol. Shoot me a DM if you can relate to being a real estate investor was like your interesting life hobby and now you’re like wait… this is work. I need an actual hobby. Like a sport or gardening, or an art class whatever. Because that’s where I’m at in my life and I’d love to comisserate with anyone else in that same space.
 
 
Now what comes next? You’ve gone into the weeds of your expenses, capex, and time. Now what do you do with this data? Well that’s where the CEO hat comes on. Everyone love to talk about being the CEO, doing the top level work of your investing business. What is that? This is that moment.
 
 
You gotta do what’s known in the military and management spaces as an after action review or AAR. You gotta take a critical eye to the data and determine the next right steps for your business. Maybe you’re seeing that you’ve got a TON of money aside for capex. Like multiple downpayments worth of reserves. Do you really need to keep setting 10% aside like the bigger pockets calculator is telling you or can you deploy that money elsewhere?
 
 
If you’re seeing your time is spent inordinately on sending out offers that aren’t getting accepted – Let’s dive into what’s going on with your dealbox? Is this a market issue where the geographic area is hot? Are you totally overestimating your rehabs
 
 
And if you’d like support on this type of decisions making. This is exactly what we do Inside of Scale School, you can get my feedback and the feedback of other landlords based on your audit results.
 
 
Because if you are only doing the audits, you aren’t really completing the loop. I love a good excel sheet as much as the next data nerd. But you gotta take the next step of coming up with action plans. Even if that action plan is throw more fuel on the fire of what you’re currently doing because it is working! Don’t be afraid to commit to some piece of your rental business. The whole thing doesn’t need to always be under construction. Plus that allows you to refocus your energy on the parts of your business that need attention. Or you know. Just chill a little bit. Chilling is ok. And trust me I’m telling myself this as much as I’m telling you this!
 
 
But by consistently tracking these metrics in your business, you will get a sense when things are off and that is priceless. It’s like the work is being done for you as the CEO because alarm bells can start going off for good or bad when things change trajectory.
 
 
If you’re looking for more support and resources around treating your rentals like a business, I want to invite you to join my free new free workshop all about scaling. In this workshop, you’ll learn my tried and true steps to scaling your portfolio not just faster but in a more sustainable way that doesn’t create more work for you or land you in legal hot water. You can register at bonniegalam.com/workshop. Plus as a special bonus, workshop attendees get an exclusive discount to my brand-new program Landlord Scale School. So come on over and check it out! The link again is bonniegalam.com/workshop of you can head on over to the show notes right on your podcast player.
 
 
Next week on Good Bones we’ll be talking all about what to do it you feel like your rental portfolio has plateaued. So if you feel like you’ve been treading water where you’re at and can’t quite breakthrough to the next level, then make sure you’re subscribed to this podcast so you don’t miss out.
 
 
Until then, I’ll see you then, same time, same place, next week. Bye for now.
 
 



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DISCLAIMER: Although Bonnie is an attorney she doesn’t give legal advice without a written and dually signed engagement agreement. All episodes of the Good Bones Podcast are educational and informational only. The information discussed here isn’t legal advice and isn’t intended to be. The information you listen to here isn’t a substitute for seeking legal advice from your own attorney

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83. 3 Metrics Every Landlord Needs to Track

May 23, 2023

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