Many real estate agents ask us what a strata roll is valued on and how this differs from a rent roll valuation. Find out the answer. 

As well as helping with the sale of rent rolls, BDH Solutions offers support for strata roll transactions. 

In 2020, many real estate agencies are looking to diversify as a way to strengthen their financial position. In addition to property sales and residential property management, they are taking on strata rolls as a way to generate stable income and grow. 

The disruption of COVID-19 has highlighted the importance of having more than one revenue stream so at BDH Solutions are seeing plenty of action in this area right now. 

For those looking to sell or buy strata rolls, it’s important to understand how the valuing process works as it is not identical to the way a rent roll is valued. 

There are a few factors at play: 

The size of the strata roll

With a rent roll, bigger is not always better, particularly if the properties are spread out across suburbs. However, with a strata roll, having a high number of lots within the same complex will add to the value. 

A valuable strata roll will generally have a large number of lots within a close geographic range. This makes life easier for the management team as there will be less travel involved.

One thing to keep in mind if you’re looking to purchase is how many managers will be needed for the strata roll you purchase. Generally one person can oversee up to 300 properties on a strata roll. After this, you will need additional headcount, which can impact profits. 

Do your sums and speak with your accountant about the manpower cost of taking on a significantly sized strata roll. 

Annual standard management fees

Different complexes have a different fee structure, often depending on the facilities within the building. 

A basic apartment block without a lot of features may charge lower fees as there is less maintenance required. For a block with elements such as secure parking, gyms and swimming pools plus carefully manicured outdoor areas, fees will be higher. 

Keep in mind the time required to take care of these elements and make sure you’re not attracted to a strata roll which generates higher fees, only to realise the workload cancels out the extra income. 

And take a look at the fees in detail and what they cover. A valuable strata roll will charge fees for administrative tasks like phone calls, site visits and meeting attendance. These small costs can add up an impact the value over time.  

Future maintainable earnings

What is the EBITA (Earnings Before Interest, Tax and Amortization) of the strata roll you wish to buy? 

Larger ($5 million+) strata rolls are likely to be valued and sold on a multiple of this figure, which will indicate future maintainable earnings. 

Length of contract

If you want to buy a strata roll, make sure the contracts in place make it worthwhile. You don’t want to pay a high sum to take over the management of several hundred lots, only to have the Executive Committee decide to go elsewhere in 12 month’s time. 

Outstanding fees

When you’re purchasing, you should also check if fee payments are up to date. There is no value in clients who don’t pay or take forever to settle invoices. 

The value of a strata roll can be complicated to figure out if you haven’t worked in this area before. Don’t rely on your accountant to do these calculations but get the help of a specialist who will base their valuation on experience and current market knowledge.

BDH Solutions are strata roll and rent roll brokers with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.