How do you value a rent roll?
You’ve nurtured your rent roll and business for years but what is it really worth?
The value of your rent roll is established at the time of settlement. The price is reached by assessing a multiplier of the annual management fees for the rent roll as at settlement.
The value of your rent roll can be influenced by variables such as:
Exactly what you are selling
If you are only selling the rent roll it is deemed an asset sale. If the rent roll is part of the the sale of shares in a business, it will have different elements affecting the value.
The size of your rent roll
The number of properties under management and number of landlords on your rent roll is a key factor in valuation.
Commission charged on rent
Another key valuation factor is the percentage of the commission as it helps determine the potential profit on the rent roll.
Longevity
The length of time you have had the properties on your books – how stable is your rent roll?
Business risks
The risks your business currently faces, including staff turnover and loss of customers. A stable business will present a more attractive proposition to a prospective buyer.
Goodwill
Goodwill, while difficult to quantify, can be of immense value if the transition is smooth and transparent.
Competition
The number of real estate agencies in your area as well as the spread of properties that are managed within your rent roll. A highly competitive area will mean the rent roll may require diligence to maintain in the future.
Maintenance costs
The ongoing and one-off costs of maintaining your rent roll are easy to document and analyse – make sure all your records are up to date and correct.
Financial Trends
The financial trends of your business will also affect your valuation. Is there a definite pattern of peaks and troughs or have you experienced steady growth?
Even the amount of money you pay your staff can have an impact on the value of a rental roll, as does the current and predicted state of the property market in your local area.
To value a rent roll, a broker will help you to identify all the areas of the roll that come into play when it comes to determining its financial worth. Just as you help your clients to prepare a property for rent or sale, after giving you an estimate your broker will be able to give you advice on making sure that your rent roll is in ‘good shape’ and able to achieve the highest possible value.
When you are ready to sell a rent roll, find a broker who has a great deal of experience in this area and who can put you in touch with genuinely interested buyers who will take on the responsibilities and goodwill of your rent-roll.
BDH Solutions are rent-roll agents 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.