Managing tenant profitaliby and profits in property asset business
Managing tenant profitability and profits – 3 important things to remember

Tenant profitability management means profitable tenant relationship management. The most important thing in managing is to find the right strategy in maximizing profits. Will I get agreements with this rent? Or what to do in a situation where the tenant’s all KPIs are good, but the tenant is thinking to resign the contract if the rent is not lowered or the unit doesn’t fulfill tenant’s needs?

In property portfolios, one can concentrate on cost-based management or profit based management. The decision between these two models depends highly on your portfolio’s structure.

Reflecting the costs and profits to each other, it’s easier to choose the part you want to concentrate on in your property business. It’s good to ask yourself:  “How is my portfolio actually performing? Should I concentrate this time more on costs and not profits?”

There are three important things to concentrate on

You can be sure your tenant profitability will stay at a good level if you:

  1. Focus on customer service

Customer service is an important part of managing tenant relationships. Communication and answering to tenant’s needs maintain a good relationship and might lead to a long period tenancy agreement. The old and present information about your tenant are things to concentrate on in decision making. It’s good to remember that as a property manager, you don’t have to make everything the tenant is demanding.

The balance between repairs and rent will be found somewhere in between. The critical limit in cost control will also appear: you start to get feedback and comments about quality. Renovations and service upgrading should always be reflected to your business strategy. Based on this you will come up with a solution that is beneficial for you and the tenant. Dialogue’s three essential rules apply to this case also: listen, discuss and ask.

  1. Analyze your tenant risk

With tenant risk, you don’t mean only the risk of one tenant – it means how every tenant affects your whole portfolio. Analyze what will happen if you add this tenant with these kinds of agreements to your portfolio? Or what will the situation be if you remove the tenant or if the tenant removes itself from the equation?

One tenant’s impact and risk are correlating positively or negatively to your whole portfolio. That’s why you shouldn’t forget to think about the big picture and take care of your most important tenants – always.

  1. Plan your strategy

Everything in a profitable business is based on a good strategy. Without it, you don’t actually know where you’re going with your business. Think about the following things: What is your investment cycle? Are you planning to invest for three, five or even 15 years? Are you trying to make profit by differentiating or perhaps with some other way?

In your property asset strategy, you can make the biggest difference by choosing long term or short term tenant contracts. Based on this it’s a lot easier to implement a well planned and efficient business strategy.

Staying up to date on your profits

Even the best plan or strategy will not succeed if you don’t follow development in real time. For example, the important metrics of managing profits and tenant profitability, like cash flow, yield and net profit, tenant costs, and additional rents tell you the truth about your strategy’s implementation.

The real-time and easy following of these metrics is made possible in our product Assetti – in addition to analyzing tenants and units in your portfolio. Our cloud solution’s automated data processes keep your property portfolio’s information updated and with the help of our visualized metrics, you get the correct data of your portfolio’s performance in a glance.

The writer of this blog is Johanna Närvä-Hakala, Head of Sales.