Factors affecting the value of a rent roll Copy

Length of Management

If a property has been managed by the same agency for a number of years, then the potential value of that property within the rent roll may be higher. Conversely, new managements that have been managed for a short period would have a lower value.

Quality of the Property

The same applies to the quality of the property. Good quality properties, in good condition, require little intervention from the property manager in their maintenance and management. These will be more valuable assets to the business, whilst a problem property that requires considerable maintenance would not be considered the same way. This also applies for houses vs units. Units are easier to manage and therefore may be considered more valuable.

Length of Tenancy & Types of Tenancy

Looking at the length of tenancy is another indicator of the value of a rental property within the rent roll. Properties where there are long term tenants, and those within a fixed term tenancy, will be considered less of a potential liability than where there is a regular 6 month change of tenant, or where many tenants are renting outside the fixed term on a month – month basis. (periodic tenancy)

Landlords with Multiple Properties

A portfolio with a significant number of landlords with multiple properties, as opposed to single properties may be considered a risk. Should such a landlord decide to move his business to another agency this could have a significant effect of the value of that portfolio.

Geographical Spread

If a large portion of your rent roll is within a close distance to the agency, this will be seen as more valuable in the eyes of a buyer. The tighter the spread, the easier the properties are to service.

Vacancy Rates

If your agency is located in an area with a high vacancy rate, this may decrease the value of the rent roll. Areas that are close to universities, schools, hospitals, facilities etc, tend to have lower vacancy rates and therefore the rent roll may be more valuable.

Average Management Fee

Every state or territory may have a benchmark fee that they try to achieve. For example in QLD, 8% is the benchmark that you wish to achieve. Whereas if you worked in NSW, it might only be 6%. Keep in mind that rents may be much higher in Sydney than Brisbane so the income generated may work out the same at the end of the day. However, if you are charging significantly less, then this may devalue the rent roll in the eyes of a buyer. By increasing your management fees you will increase your income immediately and also the value of your rent roll further down the track.

Other Fees & Charges

20% is the industry benchmark at the moment. These will be your letting, re-letting and administration fees you collect.

All these factors can have a bearing on the value of the rent roll – which is the value of the real estate agency itself.