The Top KPIs Every Real Estate Investor Should Track (And Why They Matter)
Whether you’re managing a single-family rental, a portfolio of short-term rentals, or a growing multifamily empire, one thing remains constant: you can’t improve what you don’t measure.
That’s where KPIs—Key Performance Indicators—come in. Tracking the right KPIs helps real estate investors make data-driven decisions, identify problems early, and boost profitability over time.
Here are the essential KPIs you should be tracking in your real estate business—and why they matter.
- Cash Flow
What it is: The net amount of cash left over after all income and expenses.
Why it matters: Positive cash flow is the foundation of a sustainable real estate business. If your properties aren’t generating consistent net income, you’re not building long-term wealth—you’re just covering costs.
How to use it: Monitor monthly and annual cash flow to ensure your properties are contributing to your financial goals.
- Net Operating Income (NOI)
What it is: Income from rent and other sources minus operating expenses (but excluding debt payments).
Why it matters: NOI gives a clear picture of a property’s true profitability and is used to determine value in commercial real estate through the capitalization rate.
How to use it: Compare NOI across properties to evaluate performance and identify underperforming assets.
- Capitalization Rate (Cap Rate)
What it is: NOI ÷ Property Value (or Purchase Price)
Why it matters: Cap rate helps you evaluate potential returns on an investment property and compare deals across markets.
How to use it: Set a target cap rate based on your investing strategy and market, and use it to screen new deals.
- Occupancy Rate
What it is: The percentage of time your rental units are occupied.
Why it matters: Low occupancy leads to revenue loss. High occupancy means consistent rental income—but it might also suggest your rents are too low.
How to use it: Track by unit, property, and portfolio to understand tenant turnover and rental demand.
- Gross Rent Multiplier (GRM)
What it is: Property Price ÷ Gross Annual Rent
Why it matters: GRM is a quick and simple way to compare rental properties based on income alone—though it doesn’t factor in expenses.
How to use it: Use GRM for initial screening, but follow up with a full financial analysis.
- Return on Investment (ROI)
What it is: Net Profit ÷ Total Investment
Why it matters: ROI measures how efficiently your capital is working for you. It’s essential for comparing properties and making reinvestment decisions.
How to use it: Factor in not just cash invested, but also time, financing, and improvements made to get a real sense of returns.
- Debt Service Coverage Ratio (DSCR)
What it is: NOI ÷ Annual Debt Payments
Why it matters: Lenders use DSCR to assess how comfortably you can cover your mortgage with operating income. A ratio below 1 means you’re not generating enough to pay your debt.
How to use it: Aim for a DSCR above 1.25 to ensure a buffer for unexpected expenses or vacancies.
- Operating Expense Ratio (OER)
What it is: Operating Expenses ÷ Gross Income
Why it matters: This KPI shows how much of your income is being consumed by expenses. High ratios may indicate inefficiencies or rising costs.
How to use it: Track trends over time and compare across properties to identify red flags or cost-saving opportunities.
- Internal Rate of Return (IRR)
What it is: The rate at which your investment breaks even over time, accounting for all cash flows and the eventual sale.
Why it matters: IRR is especially useful for long-term investments and projects with multiple cash flow events.
How to use it: Use IRR to evaluate the true long-term profitability of a property or development project.
Why You Should Care About KPIs
Even if you have a great gut instinct for deals, real estate is a numbers game. If you’re not tracking the right KPIs:
- You might be holding onto underperforming assets.
- You won’t spot early signs of trouble (like rising expenses or declining occupancy).
- You could miss opportunities to scale smarter or improve efficiency.
Final Thoughts
You don’t need a massive accounting department or fancy software to start tracking KPIs—but you do need clean, accurate books. That’s why partnering with a bookkeeper who understands real estate investing can make all the difference.
They’ll help you track these KPIs with precision, so you can make decisions based on facts—not just gut feelings.
