A rent roll is a document that displays key information about a rental property, including information about the tenant, the amount of rent, security deposits, lease terms, and more.
This easy-to-read report is incredibly valuable to landlords, property managers, buyers, and lenders for a wide variety of reasons. Some examples include the ability to see a snapshot view of gross rental income, past and current tenant and occupancy history, and lease renewal dates.
A rent roll is an itemized report for each of the units in a rental property.
In this report, you can find out the following:
This is a vital document that can be used to understand a rental property’s income stream. Lenders, property managers, and real estate investors alike can use rent rolls to gain a deeper understanding of the income production of a particular property.
Rent rolls aren’t just for apartment buildings, either. They can be created for single-family houses, multi-family buildings, mixed-use developments, retail properties, and office buildings.
You can also choose to create rent rolls from the perspective of a single property or for your entire portfolio. For example, you might create a consolidated rent roll if you own a number of income-producing single-family homes.
Whether you are buying or selling a rental property, a rent roll is an incredibly valuable document. A well-organized rent roll provides the gross cash flow of the asset in real-time. At the same time, it helps paint a picture of the future and whether that gross rental income is likely to increase, decrease, or stay the same down the road.
Rental property owners, lenders, property managers, and potential buyers can use a rent roll in conjunction with the income part of the profit and loss statement in order to determine the accuracy and truth of the P&L's reported gross income.
Rent rolls are an incredibly useful document for landlords and property managers, as they can help illustrate a bird’s eye view of a property or portfolio.
Here are some of the ways that a rent roll is valuable to owners and managers:
You can also use the rental income outlined on your rent roll to calculate the value of your property. The same is true if you are analyzing a rent roll for a property you are considering purchasing.
If you’re thinking about buying a rental property, you know that what you’re actually buying is the income generation potential of the property. For this reason, many investors will look for properties that are already generating income with an existing tenant.
You can use a rent roll to gain insight into a number of different important aspects of rental property ownership. Though risk is an inherent part of any investment, rent rolls can help you ensure that you are making a smart investment that will generate the type of cash flow you’re looking for.
The rent roll will make it clear how long tenants have been living in the property. The longer a tenant has been occupying a particular rental unit, the more “seasoned” they are. Generally, a seasoned tenant is a renter that has been living in a property and paying rent in full and on time for at least six months.
The longer tenants have been living in the rental and paying rent on time, the more valuable the property is in the eyes of the investor. This is because it implies that the tenant will continue to live there and pay rent, allowing you to gain ownership and start benefiting from the rental income right away and for the foreseeable future.
A rent roll won’t just tell you how much rental income the current owner is making, but it will also give you information about whether the same amount of cash flow is likely to continue.
For example, let’s say that you’re buying an apartment complex with ten units, and the rent roll indicates that seven out of the ten leases are going to be expiring in September. Unless all of the tenants renew their lease, it means that you’re going to experience a significant reduction in your cash flow unless you’re able to seamlessly place new tenants in all of the vacant units immediately.
Many experienced investors in this type of situation would require that the owner of the building renew these leases as a condition of closing. This ensures that at least the current amount of rental income will be generated once the property is in your hands.
The rent roll can also be a treasure map that lets you see hidden opportunities to increase your cash flow. For example, you might find that the current rates are well below market value, and there’s an opportunity to raise rents once the current leases expire.
Another essential piece of information you can gather from a rent roll is whether the tenants have been on time with their rent payments. This can give you a sense of whether you could expect to receive payment on time from the existing tenants or if there will likely be issues down the road.
Tenants that are consistently paying rent late are much more likely to become trouble tenants down the road. Not only might they continue not to pay rent on time, but they might cause issues when you ask them to move out.
Rent rolls do not have to be complicated and actually benefit from only providing the most necessary information. This way, they are easy to read and allow an owner or potential buyer to get a clear sense of the property’s history and potential quite quickly.
A simple rent roll might contain the following headings in a simple spreadsheet format:
If you have a multifamily unit, you might create one spreadsheet that covers all of the units in that building. Or, you could create one spreadsheet in order to be able to look at the health of your entire portfolio at a glance.
If you’re buying a rental property, it’s essential that you make sure that all of the numbers lean in your favor. A rent roll can be a valuable tool in understanding what you can expect from an income-earning property and where there is potential to increase your cash flow. At the same time, there are a number of other metrics you’ll want to consider before signing the closing documents.
To ensure that you’re making an investment that helps you reach your investment goals, use our rental property calculators.
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