We’ve been having this exact conversation with real estate clients recently… whether they should buy a rent roll and what it will mean for their business.

A rent roll acquisition can speed up growth, but it can also put pressure on your cashflow if it’s not done right. While it can increase recurring revenue and improve the value of your business, it is likely to come with additional overheads. 

Watch below as I walk you through what you need to consider before you buy, or if reading is more your thing, keep scrolling! 

 

 

is a rent roll right for you? 

 

Before moving ahead with a purchase, it’s important to take a step back and map out how a rent roll will impact your business.

Asking yourself a few simple questions will help you decide whether it’s the right move. 

 

1. will it increase net profit, not just revenue? 

You need to understand what the income and costs look like month-to-month once you factor in the additional staffing, operational, and financing costs. Keeping in mind, the goal should always be to improve your bottom line, not just the top line.
 

2. do you have the capacity to absorb it?

Growth may bring complexity to your existing infrastructure. It’s important to understand whether you have the right team, systems and processes currently in place to support it and maintain the same level of service.
 

3. can your cashflow handle the extra costs?

If you’re financing part of the acquisition, there are going to be ongoing repayments to consider. These repayments need to be worked into your cashflow to ensure your business can service the debt while continuing to operate.
 

4. do you have equity or capital for the deposit? 

Lenders generally won’t fund 100% of a rent roll acquisition. The common rule of thumb is around 60%, which means you’ll need to cover the remaining amount. Funding the gap could come from your equity in your existing rent roll, cash, or other assets.

 

we’re here to help!

 

Every rent roll acquisition is different, and what works for one business may not work for another. It’s a big decision and getting it right up front could save you a lot of time, stress and costs down the track. 

If you’d like help working through the numbers, reach out to the real estate accounting team or give us a buzz on 1300BDEPOT.

 

want more real estate insights?

Sign up to our mailing list below!