Property Management Company's ROI for RE Marketing.

In this example we will assume a very good property management comapny with 3000 rental units each leasing for $1000/month. This company has an average of 30 vacancies at any given time. And it takes them an average of 20 days to fill the vacancy.

We can derive from this that the average month has about 45 vacancies (but they are only 20 days long on average, and that's why we see 30 vacancies at any given time)
[30x(30 days in a month/20 days vacancy)=45 vacancies each 20-days long]

Q: Why would I care?
A: To identify the inefficiency, to improve the management, to make the owner happy and to make the property generate more money!
thus improving property valuation.

Vacancy cost to the landlord

Knowing that there are 45 apartments being vacated every month, we can calculate lost revenue:
45 * 20 days long = 900-apartment-days of rent not collected every month!
900-apartment-days * (1 month / 30 days) * ($1,000/month) = $30,000/month of revenue lost to vacancies.

If we can decrease the average duration of a vacancy from 20 days to 14 days, with the same number of units becoming vacant every month(45), we will have fewer vacancies at any given time:
45 * (14 days duration of vacancy / 30 day per month) = 21 vacancies at any given time.
This also equals 21 30-day long vacancies or 630-apartment-days of rent not collected per month.

21 * $1,000 = $21,000/month of revenue lost to vacancies.
This is a significant improvement in efficiency of the management comapny.

The Savings

$30,000 - $21,000 = $9,000 / month savings due to shorter vacancy duration.
or $108,000 / year!

The owners and property management comapny add $108,000 / year! to their bottom line.
That's efficiency! Therefore the owners of the buildings will stick around longer and will recommend your comapny to their owner friends!

♦ The owners add $99,360 to their bottom line per year.
♦ The property management company (assuming an 8% commission and NO OWNERSHIP) will make an extra $8,640 per year.