Analysing a rent roll involves a detailed examination of the income and expenses associated with a rental property portfolio. Here are some key steps to consider:
- Review the rental agreements: Start by reviewing the rental agreements for each property in the portfolio. This will give you an overview of the rent amounts, lease terms, and any special provisions or requirements.
- Determine the occupancy rate: Calculate the occupancy rate for each property, which is the percentage of units that are currently rented out. This will give you an indication of how well the portfolio is performing.
- Calculate the effective rent: Effective rent is the amount of rent that is actually collected, after accounting for any vacancies or rent concessions. Calculate the effective rent for each property to get a more accurate picture of its financial performance.
- Analyze the rent roll: Create a rent roll spreadsheet that lists all the rental units in the portfolio, along with their rental rates, occupancy rates, and effective rents. This will give you an at-a-glance view of the portfolio’s performance.
- Review expenses: Review the expenses associated with each property, including property taxes, insurance, maintenance costs, and management fees. Compare these expenses to the rental income to determine the net operating income (NOI) for each property.
- Calculate the capitalization rate: The capitalization rate (cap rate) is a measure of the rate of return on a rental property. Calculate the cap rate for each property by dividing the NOI by the property value.
- Identify areas for improvement: Use the information you’ve gathered to identify areas for improvement in the portfolio. This may include raising rents, reducing expenses, or improving occupancy rates.
Overall, analysing a rent roll involves a detailed examination of the income and expenses associated with a rental property portfolio. By carefully reviewing the rental agreements, calculating effective rents, and analysing expenses, you can gain a better understanding of the portfolio’s financial performance and identify areas for improvement.