If you own a real estate agency, buying a rent roll can be an excellent way to boost your properties under management without the need to onboard one new client at a time

Similarly, if you have spent many years overseeing a rent roll and want to extract some of the profits from your business, selling your rent roll can be a worthwhile exercise.

However, buying or selling a rent roll can be a lengthy process because there is a great deal of due diligence involved. Unlike a property sale, the experience can take many months rather than several weeks.

Having the support of a broker, accountant and experienced legal team is essential. To get you started, here are some tips for rent roll buyers and sellers.

Tips for buying a rent roll

It's essential to carefully evaluate a rent roll to ensure it's a good investment. Take a look at seven things to check as part of the due diligence process:

1. Quality of tenants: Check the tenant database to assess the quality of tenants, including their payment history and any disputes they've had with the previous property manager.
2. Rental yield: Calculate the rental yield of the rent roll to determine if it's a profitable investment for your real estate agency.
3. Geographic location: Evaluate the geographic location of the rent roll to determine if it's in a desirable area and has potential for growth. Think about your property management team and how easy it will be for them to get to properties under management when they need to.
4. Maintenance records: Review the maintenance records to assess the condition of the properties and identify any major repairs that may be required. You don’t want to end up in the Tribunal in relation to a property you have only just taken over responsibility for managing.
5. Staffing and systems: Evaluate the current staffing and systems in place, including software and processes.
6. Legal compliance: Ensure that the rent roll business is compliant with all legal requirements, including tenancy laws and occupational health and safety regulations. Landlord contracts should all be up to date and not expired.
7. Growth potential: Determine the potential for growth by evaluating market trends, demand for rental properties, and opportunities for expansion.

Tips for selling a rental roll

The following steps will help to streamline the process of your rent roll sale:

1. Gather financial records: Make sure you can confirm past income and expenses going back a few years.
2. Strengthen your marketing efforts: A buyer will be pleased to see that you have implemented an effective marketing strategy.
3. Ask for reviews: Positive testimonials showcase your brand’s good reputation.
4. Invest in the latest software and systems: A business that is easy to run is worth more so look into software to make your team’s life easier.
5. Get an independent valuation: Your existing accountant may not have the right skillset to calculate the market value of your rent roll so consider seeking independent advice from a specialist.
6. Review and update contracts: Make sure no contracts have expired.
7. Ensure all properties are in good condition: This will allow your buyer to ‘hit the ground running’ without having to deal with maintenance requests.
8. Sale terms: Work on a ‘Heads of Agreement’ which will set out the key terms of your final agreement with your buyer.
9. Be patient: Take the time to work with your lawyer and allow several weeks while the buyer’s team completes due diligence. To add to this, once you have negotiated a price, you will have to wait for the buyer’s finance to be approved.
10. Have a Plan B: You may end up selling parts of your rent roll to different buyers.
11. Be patient: The final price of your rent roll may not be confirmed until a few weeks after the sale because some landlords may decide not to continue with the new owner.

The terms in the exchange contract must be in your favour to ensure an outcome you’re happy with. To achieve this, work with an experienced team that understands the complexities of a rent roll sale and can explain everything in detail.