Make that new rent roll a reality.

Whether considering using an existing rent roll to acquire a new one or restructuring existing finance, seeking guidance from experienced professionals in real estate and finance can lead to optimal outcomes. Every business is unique, and understanding the specific dynamics of your rent roll journey is crucial for crafting tailored financial solutions.

What is a rent roll?

A rent roll constitutes the property management and rental segment of a real estate agency, actively engaging with both tenants and landlords involved in investment properties.

The real estate agency assumes responsibility for the management of landlords' investment properties, ensuring regular updates, rent collection, and prompt resolution of any arising issues. This encompasses tasks such as arranging new leases, negotiating rental terms, and securing new tenants when needed.

In return for these services, the real estate agency receives a predetermined percentage commission from the rent paid by tenants. The sale or acquisition of a rent roll involves one agency transferring multiple management rights related to specific properties to another agency, often within the same or similar geographical areas.

What is rent roll finance?

Rent rolls are regarded as assets that lenders can assess and utilise as collateral to extend commercial loans to real estate agencies.

The valuation or extension ratio applied by a lender is contingent upon key characteristics of the rent roll. These factors include:

Property Management Income: Lenders focus on Property Management Commissions as the primary security amount for valuation, excluding recurring fees like Lease Renewal and Letting Fees.
Sales Arm: Lenders consider the presence of a sales arm, assessing the number of properties gained or lost through sales.
Geography: The location and dispersion of properties within the rent roll influence the valuation.
Property Managers: The number of property managers, properties managed per manager, and the presence of Business Development Managers are relevant factors.
Rent Roll Growth: Lenders evaluate the average growth of the rent roll and the implemented strategy.
Average Property Commission Rate.
Number of Properties: The total number of properties within the rent roll.
Number of Multi-Owner Properties: Higher numbers may pose a risk for lenders due to potential impacts on rent if owners choose to move.
Commercial Properties: The inclusion of commercial properties within the rent roll is considered.

Some lenders conduct external valuations, while others perform internal valuations. Transactional banking becomes a crucial aspect when securing loans against a rent roll, as some lenders mandate the transfer of transactional banking to them.

Leveraging rent roll finance proves to be a strategic approach for real estate agencies or property management firms aiming to secure affordable funding for business expansion and working capital requirements.

This type of financing can be utilised for purposes such as expanding the current rent roll, leveraging equity for commercial property acquisition, or facilitating business succession planning.