Five tips on pricing your rent roll accurately
When you are pricing your rent roll or agency there are a number of tips you should consider when you are selling.
The speed of the transaction and the ease in which a sale is concluded depends on the transparency and accuracy of the information made available. This is pertinent particularly when the buyer is obtaining finance from the bank or lender.
Here are some tips to assist the seller.
1. Provide full information, both financial and operational. Supply historical information as to income and expenses of the business for the last 3 years.
2. The financial statements of the SMS rarely show their true earning capacity. The accounts need to be “normalised” to adjust for any nonessential or owner related expenses.
3. Buyers are purchasing a cash flow, what are the risks that could affect the cash flow position of the business? Is the business currently dependent on the prinicpal bringing in the majority of the income?
4. Benchmark the business- look at the ratio of property managers, support staff to the properties managed. Is this consistent with industry standards. If it isn’t, then this could affect the price a buyer will pay.
5. Increasingly, the value of a rent roll depends on the intangibles- length of time the properties have been managed, the geographic spread of the properties, the ratio of owners to properties, the amount of sundry income and letting fees obtained. All these factors and others will affect the price and it is critical to speak to our brokers to unsure you are pricing the business correctly.