Ten Top Reasons Why Your Rent Roll is Worth It!

Wednesday, December 06, 2023

The Property Management Industry is an exciting one.

Rent rolls have so much to offer the average real estate business and can provide so many benefits.

However, too many principals today tend to overlook this and do not focus on growing and maximising these benefits.

The ten reasons listed below are inspired by a presentation by Andrew Reece from Inspect Real Estate some years ago at a national conference (formerly of prorentals.com.au).

So what are the Ten Top Reasons?

#1- The business is commission-driven.

A plumbing company is hours driven. If the workmen get the work hours, income can be earned. A rent roll is commission-driven for the most part with a percentage-based fee when the rent is taken. If you don’t do any working hours on that management during the month, you still get paid! It is a kind of ‘residual income’ in that way.

#2- The rent roll is easy to monitor.

As long as you have the right tools and reporting in place and are using the right PM software, things are easy to monitor. You can calculate your vacancy rate, how many days a tenant is in arrears or how long it took to get a work order completed. All facets of the business can be monitored and measured.

#3- You can build an asset.

Try selling the real estate sales department! You won’t get too far, except that you might be able to sell the chairs, tables, and computers. Only the rent roll can be bought or sold, and only this has any real asset worth.

#4- The bank will lend against it.

Need some money now?

Because the rent roll is an asset the bank will allow you to borrow against its value. Try doing that with your sales department!

#5- It’s a reliable passive income stream.

As your rent roll fees income and charges are received every month, the fee income is very reliable and consistent and can be trusted to be there a month in and month out. Sales income, on the other hand, can be great one month and bad the next and cannot be as trustworthy.

#6- It can weather a lot of damage.

I’ve seen businesses being run by the most incompetent of staff and yet the rent roll didn’t sustain anywhere near the level of damage other businesses in other industries might have received under the same conditions.

It’s hard to push your owners out the door and most will stay even under the most trying of conditions.

#7- No stock sitting on a shelf.

You don’t have a room full of stock or need to do a stocktake of inventory. Your managements exist separate from the office and exist on a list in your PM software. There’s no need to worry about stale stock sitting on a shelf like in a retail business.

This means you don’t need to have retail space and some of the best rent rolls I’ve seen have been run from a converted garage or started in someone’s bedroom!

#8- Your service is needed all of the time.

People always need a place to live so your rental management company will always be in demand. With the great Australian dream of owning a home now so hard to achieve, rental properties will only increase in demand as we become more of a rental property culture.

#9- It’s easy to shine in the PM industry!

Most real estate companies are still owned by a principal who focusses largely on their sales business and neglects the rent roll. This means that property management is still not managed properly in many cases.

Sales are very competitive and there are many good businesses fighting to set themselves apart in the market. In property management, you have an opportunity to stand out and shine! If you do, you won’t have too many other competitors that do it as well.

You’ll likely stand alone in your marketplace surrounded by other real estate businesses doing average to poor in service quality.

#10- The rent roll will support other services.

A great rent roll stands alone and should be run as its own profit centre. However, a well-run rent roll is also a great source for sales listings and can also support other in-house services should you also have a finance department and even your own maintenance company. There’s so much you can do with it!

Still not convinced? Need some ‘big-bucks’ monetary justification as well?

A big argument the sales department has is that it’s the ‘cash cow’ and brings in the big bucks (per listing)!

Fair enough, but who’s to say property management isn’t worth as much per listing as well?

Go and add up the total fee income each management earns per year and multiply that by around 5 years is the typical average lifespan of management (before it gets sold, or the owner moves back in, etc).

Then (if you are aware of rent roll values) what is that management also worth to the company as an asset (if it was sold in a rent roll sale later on?).

Is it another $3000, $4000, or even $5000 on top of the yearly income?

So if the yearly total fee income is said $1500 per year, multiplied by 5 years then this is $7500 plus another possible $3000 for the rent roll asset value of this listing, before you know it each management is worth to the company as much as a real estate sales listing. This means each management listing could be worth $10,500 in fee income and asset value. Perhaps even more than that?

Just that a real estate sales listing is ‘quicker cash’ whereas the management listing is ‘slow release’. Each has a different purpose supporting the overall company, but BOTH are just as important to the short-term monetary needs as well as to the overall strength, viability, and long-term financial needs of the company to cover overheads, salaries, and expenses, especially when there’s a downturn in the sales market. Plus there’s also an asset to sell at the end of the day.

Is it more than a dream?

Who’d have thought we have to sell these benefits to a real estate business owner already running a rent roll? Sadly, most business owners haven’t realised the full true benefits of what a quality profitable rent roll can do for them.

It is our dream that one day the rent roll will be of equal importance to the principal as that of the sales department in most businesses, but we are not there yet.

The rent roll has so much to offer anyone who wishes to make a goldmine from it.

Invest in your rent roll and you will receive a rich and fruitful reward!

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