The team from Real Estate Dynamics share their experience on buying a Rent Roll.

Risk of litigation claims, increase costs of staff, resources and technology all contribute to Agency Principals questioning the sustainability of their rent roll.

One of the key services at Real Estate Dynamics is 'Agency and Rent Roll brokerage'. We are seeing a growing number of business owners choosing to sell their small to medium sized rent roll. With strategic marketing of a Rent Roll for sale we experience fierce competition from Buyers to purchase and integrate it with their existing Rent Roll. The successful Buyer generates additional income immediately.

There are two typles of Agency costs - fixed and variable. When purchasing a Rent Roll of around 150 properties the Buyer's existing fixed costs rarely change, i.e. desk cost, rent, trust account and procedural systems. Added variable costs are minimal and may include an extra Property Manager and possibly an administration person to assist the Property Manager or the team. The income generated from buying a small Rent Roll far exceeds the extra associated costs which is naturally attractive to many business owners.

However, not all Rents Rolls for sale may be a great investment. Care must be taken to ensure that the Rent Roll for sale is worth the purchase price and that the purchase will not cause deterioration of the existing Rent Roll due to the poor condition of the Rent Roll purchased. In this case typically 80% or more of staff time is spent on 20% of properties; a recipe for disaster.

Taking on any size Rent Roll requires a quality Trust Account program and procedural system in place. The Agency needs to implement procedures to transfer a Rent Roll after settlement to include actions required throughout the Contract's retention period, which is usually 3 months.

One of the first steps after Settlement would be to view all management files to check the following items and details exist and are in sound order:

• Current lease status
• Entry Condition Report
• Bond lodgement
• Recent routine inspection report
• Outstanding maintenance
• Rent paid to date
• Familiarisation with diary notes and documentation
• Identify work in progress

Subject to the retention Contract terms, this period is the only opportunity to terminate a transferred management with major property or Landlord issues. As each property management costs money it is beneficial to engage additional staff if required to work through this process promptly rather than after the retention period expires as it will cost the Agency the value of that management paid at settlement which may be equal to 3 x or 4 x the annual commission.

Thorough reseach and due diligence of any Rent Roll is essential. Taking a proactive approach in bedding down a new Rent Roll will in turn generate increased income, profit and Agency profile.

About Real Estate Dynamics
Real Estate Dynamics offers an extensive range of services and products specifically designed for the professional development of Real Estate agencies, Property Management businesses, their business owners, their teams and team members.

For more information regarding Procedural Systems, Agency or Rent Roll Brokerage or Contract products please contact Carol Levitt or Paul Brooks, Directors of Real Estate Dynamics 
T: 1300 734 596
E: admin@realestatedynamics.com.au

 

 

The opinions expressed in this article are not those of Console Australia Pty Ltd. Console Australia Pty Ltd bears no responsibility or liability for any false or misleading information provided in this article.