Take a look at what’s happening with rent rolls in 2023 and how your agency can maximise the value of yours.
How is the rent roll market performing in 2023? With the property landscape looking markedly different to 2021 and 2022, things have definitely changed. However, this means different opportunities exist for different sections of the market.
Rent roll performance in 2023
Rental markets are very tight at the moment, with vacancies at all-time lows across many capital cities.
In Melbourne, for example, vacancies peaked at 5.5% in December 2020 but have since fallen to 1.1% as of February 2023. This has been sparked by a slowdown in new developments as well as the return of international students to Australia. The Government’s recent plans for streamlined migration are only likely to add pressure to the situation.
For property management businesses, competition to secure new business is tight. With fewer vacant properties, there are fewer clients looking for support. However, most investment properties are leased with paying renters, which is good news because it reduces the time spent looking for renters. To add to this, yields are strong due to those low vacancy rates. If you own a real estate agency, there is the opportunity to refine your rent roll so it is robust and could potentially sell quickly.
Rent roll challenges in 2023
Right now, rent rolls tend to be running with fewer properties under management but fewer vacant homes. This increases the need to have quality clients who are not time wasters. It’s a good time to apply the 20/80 rule and look to offboard the 20% of clients who take up 80% of your time.
Meanwhile, there is still a shortage of talented, reliable and experienced property managers in the market. Because of this, staff are pushing for flexible work arrangements, fewer hours and perks such as days off, weekends off and personal/professional development.
If you can find a way to incentivise your workforce, you’ll be able to stay ahead of the competition and build a healthier rent roll.
It’s a buyer’s market
There will always be properties to manage and people who need to rent homes. As a real estate business, 2023 is an excellent time to acquire a rent roll. Instead of relying on word of mouth and marketing to find new business, it can make more sense to purchase a ready-made list of properties.
By doing this, you can take advantage of healthy yields and high occupancy rates. There will be no need to scout for new rental property owners and build your roll client by client.
A purchase can also come with staff; if you do your due diligence and make sure they are capable, this can make a big difference to your business results.
What to keep in mind before you buy a rent roll
When preparing to purchase a rent roll, talk to your accountant and broker about your options to cover the cost. You may be able to negotiate to pay in stages so you can avoid dealing with a large debt and very high interest rates. You may also be able to negotiate to buy part of a rent roll, particularly if it has been for sale for a long period of time.
Don’t forget to review the authorities before you sign. A diligent property manager will ensure all contracts are up to date and haven’t expired. The other thing to check is whether the properties on the roll are all compliant in terms of legislation in the state where you live.
And of course you need to work with your financial team to complete forecasting so you can work out how profitable your rent roll will be in the future.
Purchasing a rent roll is still an excellent way to fast-track business growth and revenue. If you’d like to explore this option, contact BDH Solutions today.