Naturally one of the first questions asked by a prospective seller will be “what is my rent roll worth?”. Now that’s fair enough, as there are many factors that will ultimately play a part in determining the final sale price, so it’s a good idea to be across that detail.

But what then, what should be the first step on the path to selling?

 

is my rent roll in a condition to sell?

Perhaps even more fundamental than price is making sure that your rent roll is in a condition to sell.

So, what do I mean by that?

What I’m talking about is the administrative back end of your rent roll, that is all the forms, processes and compliance matters that are the foundation of your role as a property manager – everything from having compliant Form 6s to a register of keys. Ultimately, it is this administrative machine, and particularly compliant appointment forms, that underpins your collection of commission income – which at the end of the day is what you are selling.

 

why is rent roll administration important?

While the rent roll sale market is active, it remains competitive, and buyers [and their financiers] will not tolerate messy portfolios. Such portfolios may face price discounts, increased retention periods, [or both] relative to the portfolios condition.  

In extreme cases, the buyer may withdraw, and the sale will not proceed, putting you back at square one.

To maximise the value of your rent roll, it’s essential to have your portfolio sale ready by having your administrative housekeeping in order.

In addition, when it comes to sale time, you’ll have the peace of mind of knowing that your admin is in order, which should simplify the due diligence process for the buyer thereby enhancing your chance of completing a successful sale.

 

what is the first step?

As a starting point, take a buyer’s view of your portfolio administration.

At its most basic level, this is about ensuring that all your managements are on a compliant Form 6.

While some argue that a Form20a can be sold [and this isn’t the place for that legal worm hole], the reality is that banks will generally only lend on compliant Form 6s. This has become the standard that buyers expect.

Other items to review include:

  • The individual property files relating to appointment + ongoing management
  • Records for entry condition reports + routine inspections
  • Maintenance records + current job orders
  • Pool safety + smoke alarm compliance records
  • Other management and financial records for the business

What we are really talking about is undertaking pre-sale due diligence. You can either do this yourself or use a consultant. If you’d like an example of a due diligence checklist, please reach out and we can share our internal list to help give you an idea of the types of things that buyers are looking for.

Even if you are an experienced agent, if you do nothing else before selling, consider having someone independently review a sample of your Form 6s and give you some feedback to ensure compliance.

Sadly, we have seen cases where good agents have had minor errors creep into their Form 6s over time, resulting in transaction delays, and in some cases significant work prior to settlement to achieve compliance.

 

final takeaway

Undertaking pre-sale due diligence represents a modest investment relative to the significant value of most rent rolls. This investment should pay for itself through a higher sale price + can help limit retention losses, ultimately increasing the actual cash received after the sale.

Arguably though, the greatest value may come from knowing that your portfolio is in order before embarking on the sale journey.

 

we’re here to help

If you’d like to know more about what your rent roll is worth, or your options for selling, please feel free to reach out to our agency broking team at broking@businessdepot.com.au or give us a buzz at 1300BDEPOT.