Property managers and investors have a range of documents at their disposal to assess a property’s current and future profitability. This is where a rent roll comes in.
Here’s a comprehensive guide explaining what a rent roll is, its features, and why investors buy them:
What is a Rent Roll?
A rent roll is a snapshot of an income-producing residential or commercial property. This includes houses, multi-family buildings, retail and office properties, and mixed-use properties.
A rent roll typically indicates a property’s potential profitability. It also plays a critical role when landlords apply financial performance formulas, such as the gross rent multiplier (GRM), capitalisation rate, and internal rate of return (IRR).
Finding rent rolls for sale is pretty straightforward. Reliable real estate companies will assess your portfolio and help you find the right rent roll. This will ensure peace of mind and help you get your money’s worth.
Features of a Rent Roll
A rent roll is an itemised report of a property, containing the following features:
Property information: property type, address, and owner or management company
Information on each unit: unit number, square footage, number of bedrooms, features, or amenities
Lease information: the start and end of lease agreements for each unit
Tenant information: names and contact details of tenants
Gross rental income: the total income generated by the property
Concessions: any discounts provided to the tenants
Payment history: record of all payments, including late deposits
Occupancy status: to indicate whether a unit is occupied, vacant, or under maintenance
Why Investors Buy Rent Rolls
A rent roll is more than just mundane data for investors. Here are six reasons investors buy them:
Simplified Market Research
As mentioned earlier, a rent roll has all the important property details in one document. Investors can quickly compare portfolios and other potential investments to make an informed decision.
Due Diligence
Banks and real estate investors buy rent rolls as part of their due diligence process. They offer a clear picture of a property’s operational and financial condition. This is necessary for making an informed decision.
Income Assessment
Rent rolls determine a property’s income potential. By looking at what each tenant is paying and how the rents have increased over time, investors know exactly what they’re getting into.
Risk Management
Real estate investment is a high-risk venture. You don’t want to buy a multi-family building without knowing the property’s history. By buying a rent roll, you can identify potential risks, such as high vacancy, unfavourable lease terms, and delayed payments from tenants.
Business Expansion
As a real estate investor with limited funds, building an expansive portfolio can be difficult. A rent roll can simplify this process. With a ready-made list of tenants, clients, or properties, you don’t have to start things from scratch.
Increased Property Value
Experts indicate that a property with a detailed rent roll can fetch higher prices. During a sale or refinancing, the value might be high, resulting in favourable circumstances.