There’s a lot of interest amongst our clients to snap up opportunities to grow their rent rolls. As a result, we’ve received many questions like “how can I fund this?” or “can I get it done?”
So I’ve prepared a quick video [and a transcript below] to help you understand the things you should know if you are considering a rent roll acquisition.
Hello again, Craig Harrison from the real estate team here at businessDEPOT. Today, I want to talk to you about acquiring a rent roll.
There are a lot of opportunities out there at the moment. People are starting to ask, “How can I fund this? Can I get it done?”
using equity to secure loans
What you may understand is that the banks will lend against the equity in a rent roll. What you may not know is, how much you can use your existing rent roll to help with that funding.
Banks will typically lend about 60% of a rent roll’s value. Notably, this is after considering the combined value of the rent roll [once it has been acquired and consolidated into your existing one].
Let’s say you’ve got an existing rent roll of 250 properties generating $1,500 of management fees per year. If you are in a market with a multiple of $3, that’s going to give you a rent roll value of about $1.125 million.
You might be looking at growing your rent roll through acquisition. You’ve found 150 properties with roughly the same management income and the same multiple as your existing portfolio. The cost of acquisition is going to be about $675,000.
The bank will now look at the consolidated value of these two rent rolls when determining whether they will lend up to 60% of your equity.
If your existing portfolio is unencumbered and you have no debt, that makes up about 63% of the value… which means that you are carrying more equity into this than what the bank needs. Therefore, they will fund that acquisition of only 37% of your equity, without you having to put your hand in your pocket.
This of course can vary depending on your bank, the rent roll and how much equity you hold.
we’re here to help!
If you’re looking to acquire a rent roll you can check out our Agency Broking page for available listings.
And if you do get an opportunity to look at a rent roll, please feel free to reach out to myself or the businessDEPOT team at email@example.com or give us a buzz on 1300BDEPOT. We can help you run the numbers and determine if it’s right for you.
general advice disclaimer
The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.