The leasing funnel describes how well your company converts leads into leases. This conversation between a client and I illustrates the usefulness of knowing your leasing funnel metrics.
This concept is explained by Neil Bawa in this PDF available at Multifamily University.
Me: “I see you’ve budgeted $25,000 for advertising next month. Is that how much you plan to spend?”
Executive: “Yes, across all of our properties”
Me: “How did you decide on $25,00. Why not $20,000 or $30,000?”
Executive: “Well, carried over budgets from last year. In most cases we didn’t make any changes. So, $25,000 is what we spent last year on advertising.”
Me: “How many leads do you expect to generate from $25,000 in advertising?”
Executive: “Not quite sure. I think around 600 qualified leads.”
Me: “How many vacancies do you need to fill?”
Executive: “Not quite sure. I think we’ll have enough leads so that we can hit our occupancy goals.”
Me: “Do you know roughly how many leads turn into showings, and applications, and eventually leases?”
Executive: “No … it would be nice to know that. Also would be nice to know which channels we get the best leads from. Heck, I’d love to be able start with knowing how many units are going to be vacant, and then set my advertising spend based on that!”
Me: “We put all that information in your hands. Let’s get to work.”
Fast forward one year.
Me: “I see you’ve budgeted $32,000 for advertising next month. Is that how much you plan to spend?”
Executive: “You bet! A lot has changed in the past year in terms of how we decide how much to spend on advertising.”
Me: “Tell me more.”
Executive: “First of all, we have a rolling 3 month forecast of supply and demand. That is, we look at how move out and move ins are expected each week for the next 12 weeks.
That tells us how many units we need to fill each week.
Now, one big change we have made is that any inquiry we get, whether by phone, or website, or text, we ask for the desired move in date. We record that date.
This tells us how much demand we are seeing for any week. This is very powerful information that we didn’t have before.”
Me: “How so?”
Executive: “By knowing the demand for units and the supply of units, by number of bedrooms, mind you, we know how many leads we have to close and how many more leads we have to generate.”
Me: “So, how does that drive your advertising spend?”
Executive: “Here are some ratios we use. We’ve determined these numbers, using RentViewer, by looking at historical data. For every 10 inquiries that want to move in in the next month, we will get one lease. If the caller’s desired move in date is 2 to 3 months out, we will get 1 lease out every 15 to 20 inquiries. So, not only are we counting how many leads we have for a specific week, we are also putting a probability on each lead.
Another set of numbers we know is how well we are converting leads at each stage. So, for every 20 phone or text inquiries, we get 5 showings. For every 5 showings we get two applications. Most of our applicants get approved, and we assume 70% of applications will become leases. If the same person makes an inquiry a second time, we increase the probability for that lead.
We collect a lot of data. This really helps our operations team maintain a high level of occupancy and we minimize vacancy loss. Our leasing team likes this because we are not in a “boom – bust” mode. We calibrate the lead traffic based on how many units we need to fill, so there’s no need to go into concessions and breaks.”
Me: “You’ve come a long way since we spoke a year ago!”
Executive: “You bet! There’s still room to get better. We are looking at where the leads come from, such as Apartments.com or Craigslist, and also which agent worked with prospect. With this leasing funnel metrics data we will be allocate dollars the channel that drive the best traffic, and also understand where our agents need coaching.”
I hope this real life case gives you an idea of how your peers in multifamily are using leasing funnel metrics data to find ways to drive higher NOI. More of this story is this blog post.
We’d love to talk to you.
Call 248-601-6400 or Book a FREE meeting with us today!