Rent roll - to build or to buy?

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Integral to the success of any real estate agency is an ever-growing, good quality rent roll.

 

The more properties you manage, the more contacts you have for potential buyers, sellers and investors. A strong rent roll also counts as an asset when it comes time to sell in the future.

 

As a smaller agency looking to grow, you may find yourself faced with the decision of whether to build your rent roll from scratch or buy one ready to go. There are pros and cons for each.

 

Build it up

There’s no doubt about it - creating a healthy rent roll from scratch is hard work and takes time. Getting to your first 100 property owners may feel easy but to go beyond that number usually means bringing on another pair of hands. This will put a dent in your profits, however it is necessary to take this step backwards in order to keep moving forwards.

 

The benefit of organically building a rent roll is you can establish a relationship with each client as you go, becoming familiar with their needs and requests. You can also implement your own systems and policies [link to systems and policies article] so staff, landlords and tenants are on the same page.

 

A strong strategy is required to build a rent roll. There is a lot of competition out there and you must stand out in order to get those properties on your books. Your strategy should include a sales and marketing campaign, the cost of which is potential setback to your rent roll becoming profitable.

 

Building a rent roll can be a way of avoiding a large expense at the outset, however you will be paying in your own time as it can take months or even years to get it to a point where it is a positive cash driver for your business.

 

Buy in

Borrowing the money to buy your own rent roll gives you the benefit of immediate cash flow from rental commissions, letting fees and sundry fees. You also gain instant access to the clients on the list, many of whom may go on to invest in future rental properties.

 

To maximise the benefits and reduce the time it takes to make a profit, check before you buy whether the previous estate agent / vendor had a good relationship with their clients. This will help you hit the ground running and will make it easier to leverage your roll to offer other services.

 

At your end, when you buy a rent roll it is important to keep your new landlords and tenants’ happiness in mind. Make the transition as smooth as possible and touch base to see if you can improve on the service they have had in the the past.

 

Consider a retention clause when purchasing a rent roll. If a property drops off the list during the agreed on retention period then you will not have it included in the cost. Look too at the properties which could cause a headache - if there are too many conditions and caveats or the landlord has been a difficult client you may wish to consider removing them before you make a purchase.

 

A quality rent roll is a solid asset and a sound investment. If you are doing things right, you should be able to offset the cost within 2 - 5 years.

The clear benefit of buying a rent roll is the instant cash flow it will bring to your business. When leveraged correctly, you can use it to improve your buyer and seller database, meaning it will contribute to the growth of your business in more ways than one.

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 rent roll listings, register here.