Definition of rent roll?
A “rent roll” is one of the most important documents that a rental property owner needs to maintain. This document enlists all the units that a person owns and has leased out, along with all other relevant details pertaining to the lease. It is the rent roll document that gives detailed information about the total rental income earned by a landlord, either from single-family units, multi-family homes, shopping centers, or office buildings.
The information provided by a rent roll document is used for calculating critical financial performance formulas for the rental property. These include the internal rate of return, net operating income, cap rate, and gross rent multiplier. Property owners need to maintain this document as a part of their record-keeping system, and should update it should there be any change in the lease status, rental income, and tenant base.
Below are some details provided on a rent roll document:
- Name of the owner or the property management company and their address.
- Number of units, unit number, tenantsww occupying the units, physical amenities, such as beds and bathrooms, and remodeling history.
- Details of tenants, such as name, amount of monthly rent paid by them, lease term, rental concessions, security deposit, and additional fees.
- Summaries of monthly and yearly rental income.
How does a rent roll document work?
In essence, a rent roll document is of importance to both property owners and property managers. Both use the document to perform a thorough analysis of any investment property. They can take a look at the document to check the number of tenants whose lease agreements are expiring in the coming months. This helps them to know who to reach out to in case they intend to renew their lease. If tenants have no plans of renewing the lease, the landlord or the property manager will be able to look for fresh tenants.
The rent roll document is of utmost significance to property owners because it allows them to perform market research by drawing a comparison between the average rent they are earning from their rental units and those currently offered on the real estate market. In case they find that their rental income is lower than the market average, then they can list units whose lease agreements are expiring at a higher rate and increase their rental income.
Property buyers and real estate investors can use the rent roll document to analyze the feasibility of their investment. A potential property buyer may notice that a large number of lease agreements are expiring in the next few months, and the rent is above the market rates. This would suggest that their rental income may plummet majorly if they buy the rental property. At the same time, such an analysis helps a property investor to know whether there lies a scope to increase the rent based on open market rates.
Given the vital details that a rent roll document provides to landlords and property managers, it’s imperative that these parties maintain this document throughout their leasing period.
-The Multifamily Review Team
Hi, my name is Michael Avent. I founded The Multifamily Review in 2020. I’m a Commercial Agent at Northcap Multifamily located in Las Vegas, Nevada. My vision for The Multifamily Review is to be the most trusted resource for all Multifamily Investors and Industry Professionals. We strive to offer the best and most up to date content to our readers and are always open for suggestions. Make sure you sign up to join our newsletter to stay up to date on our latest blog, ebook, and more exclusive content that’s coming your way! The Multifamily Review team and I look forward to building a deeper relationship with you!
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