Why Increasing Income is Better Than Rent Roll Growth!

Tuesday, December 05, 2023

Everyone wants to grow their rent roll! Every principal I speak with always wants to find ways to increase their rent roll numbers.

They want to grow their numbers so they can increase their rent roll income, profit margin, and value of their business. They want to simply grow income, and in their mind, they need to achieve this by growing their property management numbers.

Rent roll growth is one of many ways to increase income!

However, rent roll growth is not the only way to grow income. Profitability strategies will achieve this quite nicely. Why is the growth of income by numbers not as good as the growth of income by profitability strategies? Here are some reasons –

a) Rent roll growth brings more work: every new property means a new landlord, new tenant, new repairs and maintenance, new lease renewals, potentially new disputes with tribunal hearings, etc. Every new property brings on a new layer of work for the department. Bring into the department an extra 100-150 properties and you will agree with me!

b) Rent roll growth brings more overheads:
if you bring in an extra 100-150 properties you will probably need to look at more staff, more desk space, new stationery, a new computer and computer access, a new phone, new phone costs, a new property management car or another car allowance, etc. Your existing overheads will increase and be added to with rent roll growth.

c) Your rent roll value is not based on numbers
: it is based on income! Isn’t that interesting! You might have the same numbers but increase management fee income and the value of your rent roll increases overall.

You can double your profit margin at no extra cost!

The magic factor is that if we aim to grow profitability we can possibly increase our income by up to 20% should it be done properly, double our profit margin and increase the value of our rent roll without adding any extra work or overheads! That’s the smart business in anyone’s book!

As a property management consultancy team, with the offices we have worked with conducting property management business health checks, the departments that separate property management income from sales income measure an average of 18% net profit across the board.

This means that if their average income per property was $1500 per year, their profit margin is approx $300 per property per year. Therefore to double your profit margin you only need to add another $300 in fees per property per year.

Increasing income is better than rent roll growth!

How do you do that, you might ask? It is a simple process that we do not have time for in this article, but I hope that you understand my point that increasing income is far better than rent roll growth. It is not something that is out of your reach and is very easily attainable. (See our article Why Increasing Fees Works).


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