“We’ve decided to undertake the due diligence ourselves due to cost”.
I get it. Cashflow is king and business owners are trying to save costs when purchasing a rent roll. Also, you have been doing the job for years….so why employ someone to do it?
Today, our currency is Time exchanged for Dollars.
Time = $$$$$$$
Have you worked out the cost to undertake a rent roll due diligence using yourself or your staff members and the impact that has on your business or family?
Let’s work out your value – your hourly rate…we all have one!
Step 1 – Determine your income
Step 2 – Divide your income by 38 hours and again by 52 weeks.
(I know I know…most agents work 24/7 but I am aware you sleep, spend time with your families, drink wine and take Monday’s off – I see your Insta page).
Using the above formula, for example purposes we will use a Selling Principal with Sales Commissions of $300,000 per annum. Your hourly rate equates to approximately $150 per hour.
A rent roll due diligence which is undertaken thoroughly and on 100 managements which have been well managed should take you 50 hours to complete. That is right, 50 hours. This includes all searches, going through paperwork, matching it to the computer system, making sure compliance has been correctly maintained, driving to and from the business and recording the findings, asking questions and updating based on the answers and additional information provided. The variables start once the paperwork and filing are not done correctly.
The cost to you as a business owner equates to $7,500. It is likely you will do this at night, so you lose time with your family and sleep. If you undertake this during the day, what is the real cost to your business, your sales pipeline and how are you covering the expenses of the business while you are not able to produce this income for that 50 hours?
I have completed over 1,400 reports in my career and each report has recorded discrepancies in paperwork management or completion/software input.
I apologies for being so forward…under these circumstances relying on persons of the business including yourself is to complete the rent roll due diligence is undertaking this important task with the same persons making the mistakes in your business.
Using your property manager to undertake the rent roll due diligence also incurs a cost to you and impact on your business and impact on the property manager and their family. Let’s explore this option:
Step 1 – Determine the Senior Property Managers or Department Heads Salary and any assistant that you employ.
Step 2 – Divide the income by 38 hours and again by 52 weeks.
Using the above formula, for example purposes we will use a Department Head or Senior Property Manager with a salary of $76,650 per annum inclusive of Superannuation. The hourly rate equates to approximately $39 per hour.
Undertaking the rent roll due diligence thoroughly on 100 managements at 50 hours = $1,950. This excludes penalty rates if undertaken after hours, meal allowance etc.
If this staff member undertakes this after hours, they lose time with their family and it is unlikely that the staff member will be willing to work from 6pm to 2pm to cover a day’s work. If the staff member is unable to attend the next day as normal or undertakes the rent roll due diligence during work hours, their daily duties will be required to be performed by another staff member or yourself and therefore the domino effect within the business starts where one person has to pick up another’s workload and their workload is required to be assisted by another person etc. The cost to maintain the workload starts to grow and the cost of $1,950 continues to grow.
No matter which way you try to save money, you cannot deny that undertaking good business practices and completing a rent roll due diligence correctly with attention to detail while minimising the risk associated with selling your rent roll, preparing to buy a rent roll, buying a rent roll and running your business doesn’t cost your business is some way.
Why Hire an External Consultant?
The Opulence Consultancy rent roll due diligence has been designed to assist business owners prepare for sale, operate efficient and affluent businesses, find foundational flaws and assist in the buying process. Best practice, a deep level of understanding as to the value of a rent roll, operating and owning a real estate business and buying and selling of rent rolls are used to provide a thorough and informative report which highlights all discrepancies within the rent roll portfolio.
Opulence Consultancy is dedicated to assisting real estate industry business owners in operating and running affluent and efficient businesses.