What is Rent Roll Analysis?

There is a method for performing rent roll analysis that allows for all the steps to be covered.  Miss one step, and there is a dramatic "hole" in your outcomes.  Rent roll analysis is not hard. However, it does require focus and attention to detail.  Rent roll analysis requires a methodical tenacity to get it right.  What is rent roll analysis?

Rent Roll Analysis is determining the validity, or reliability, of rental revenue collected from income property

Why is this important?  Because every year, billions of dollars in property change hands "valued" based on the property's ability to deliver reliable income. Rent roll analysis is a primary tool in determining the strength of income, the ability of a property to perform as described, to provide the revenue the buyer expects.

Rent roll analysis concludes with having validated the in-place rental income as being true based on a review of records that can tie income perceived (from the rent roll) with income received.

Rent roll analysis is the first step in assessing an income-producing real estate asset. Getting this right is imperative as this number affects every other figure in the financial analysis that follows.

The best of all worlds is when buyers and sellers can agree on the method of measuring rental income; when both are on the same page and can agree on something (anything) as a point of fact. Gaining agreement between the parties that the rent roll is true and correct is a big step towards a successful closing and asset sale.

A rent roll refers to the amount of rent due from each property. In pre-revolutionary America, these properties were almost exclusively agricultural lands “rented” in exchange for a percentage of crops produced.  In other contracts, the rent was a flat fee paid to the landowner.

The use of the rent roll today is a standard operating procedure for multifamily owners and operators. They provide a wealth of operating information that assists in managing the business of rental property.

A rent roll is more than an electronic page with names and amounts. Broader concerns can aggregate this data for review creating proprietary knowledge specific to their portfolio.  The convergence of low-cost computing power and big data is making this possible.

Rent roll analysis, while perceived as "low tech" can be utilized to create new knowledge. This is the premise of the concepts presented in "How To Read A Rent Roll" and the use of the Rent Roll Triangle (r).


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