Case Study 4

The Impact of Trust Account Fraud

Situation 

The Client was purchasing a rent roll in Brisbane’s outer suburbs.  The client needed to satisfy the rent roll due diligence clause of the contract.  The multiple adopted in the contract of sale was 2.2 times annualised property management fee income. The time frame for the rent roll due diligence was 14 days from the date of contract. 

 

Opulence Consultancy had worked with the Client on multiple occasions and was employed to undertake the rent roll due diligence for the rent roll being purchased.  The cost of the rent roll due diligence was 1.43% of the sale price value/2.6 property management files.  

 

Based on the multiple of the contract, the purchase price was approximately $468,000

 

Employment of Opulence Consultancy

Opulence Consultancy was employed to undertake the rent roll due diligence on the rent roll being purchased by the Client and through the investigations and discussions was able to determine trust account fraud.  

 

Outcome 

The rent roll due diligence was undertaken quickly, and the Seller and employees of the business were helpful.  The discrepancies and impact of the trust account issues were discussed with the Client.  

 

The client was able to negotiate the multiple from 2.2 times to 1.8 times of annualised management fee income.  

 

The sale price was reduced to $383,000, saving the Client approximately $85,000.  The cost of the rent roll due diligence was 1.75% of the sale price value/3.18 property management files.  The cost of the rent roll due diligence was nominal in comparison to the saving of the sale price achieved.