Why is Rent Roll Important for Landlords?
You may have heard other landlords talking about a rent roll.But what is a rent roll?How do you make one?
A rent roll is simply a spreadsheet that lists certain aspects of each property in your portfolio. It will most likely include information on each unit’s rent rate, security deposit amount, late fees, and start and end dates. Having this data available at a glance is a great opportunity for you to see which properties may need extra attention, or which units you will need to market to fill upcoming vacancies.
Why Should I Make a Rent Roll?
There are many reasons why you should consider making a rent roll for your rental property business. Overall, being able to see information about your business as a whole will help you manage your units and inform impactful decisions regarding your properties. Specifically, there are four main reasons why you should make a rent roll.
#1 Financial Planning
Your rent roll can include whatever metrics you’d like. Although most include rent and other charges, you could also include the property taxes, utility cost, and required maintenance expenses for each property as well. That way, you can calculate the NOI, or net operating income, for each property and determine the profitability of your business.
Also, you can plan for vacancies by looking at a rent roll. Since you’ll list each unit’s lease start and end dates, you’ll be able to tell which months will have a lot of vacancies and can plan your marketing strategy accordingly.
#2 Rental Income Analysis
A rent roll can be helpful when conducting a rental income analysis,or determining which of your properties is doing well, and which aren’t. For example, if you see that one of your properties is generating more income than your others, you can investigate that property to decide what you can change about your underperforming properties that will bring in similar income.
Similarly, if one unit is bringing in substantially less income than your others, you can investigate why. Perhaps it needs renovations or repairs, or maybe you’re charging too much for the market it’s in.
#3 Outlook for Lenders
One of the most important reasons to create a rent roll is to provide lenders valuable insight into your business in a standardized format that you both are likely to understand. Lenders will use this information to assess your NOI, determine what loan amount to give you, and how much to charge in interest. They want to know how much risk they’re taking on in lending this money to you, and having the data to assess that right in front of them is helpful.
Additionally, a rent roll can help lenders realize your property’s market position. They can analyze rental and occupancy rates of similar surrounding properties and then compare yours to determine whether they have long-term growth potential.
#4 Tenant Management
Managing your tenants’ move in and move out dates, late fees, and rent collection is a lot of work. With a rent roll, it’s easy to see all your occupied units’ tenant statistics. You will be able to see whether someone is behind on rent consistently and may need rent payment reminders or if you have a lot of incoming tenants in a particular month.
Conclusion
A rent roll will make it easy for you to calculate how much income you’re generating from your properties and determine whether you have incoming fluctuations in that income based on vacancies or late payments. Creating and maintaining a rent roll is easy, so do yourself and your business a favor by creating one today.