I’ve previously discussed the four foundations of successful real estate business. Administration is the one I detest the most and the one that I am the worst at. I would rather go snake a clogged toilet than deal with paperwork. However, my business doesn’t care what my thoughts on administrative work are. It needs the administrative work to meet and maintain a minimum standard, the most basic part of this is the Rent Roll.
Rent Roll
Every successful real estate venture needs a rent roll, no questions asked. It is extremely hard to be organized and have a firm foundation on which to run and grow your business without one.
What is a Good Rent Roll?
A rent roll is a listing of all your apartments and the tenants who live them. It also must include:
- how much each tenant pays in rent
- what the rent includes
- the anniversary date of their lease.
That is the minimum required information for your rent roll. You can add more information to the rent roll if you choose. For example, my rent roll also includes:
- target rent
- tenant contact Information
- emergency contact Information
- date they moved-in
- status of lease: yearly, monthly, gave notice, etc.
- what the rent includes
- date of last rental increase
- security deposit and date
What is a Bad Rent Roll?
I received the rent roll and P&L statements for an apartment building I was interested in buying. The rent roll had first names, but no last names. I couldn’t figure out what the tenants were supposed to pay in rent, and I had no idea what they actually paid in rent. I bet the landlord had no idea either. I also couldn’t tell how long any of the tenants had lived in the building. Were they short-term tenants, long-term tenants, had 50% given notice to move-out? I had no idea.
When I received those reports I had no faith in any of the information the owner had provided me. Basically, I couldn’t analyze this building. I pushed and got copies of bills and statements from the utility companies to verify some of his numbers. It turned out that his estimates on heating costs were about 30% too low.
Why do you need a Good Rent Roll?
For three reasons:
1) It keeps your tenant information organized
The rent roll is the back bone of the administrative side of your business. Having your rent roll in place lets you:
- determine if you should raise someone’s rent
- know which tenants are moving in and out
- track your vacancy rates and turnover rates.
- not have to keep all this information in your head
2) You can make and act on decisions about your tenants
With your rent roll you can quickly sort to see whose lease expires in the next 3 months. You can determine how many month-to-month leases you have. You can identify who have lived with you for five years and send them a thank you note. You have all the information you will need in one spot.
3) Your bankers/financiers will want to see it when you are looking to expand, refinance or anything else involving them.
Any time you apply for a new mortgage or refinance your current mortgage, the lender is going to verify your debt/service ratio to make sure that you can pay the mortgage. They will get your rental income from your rent roll. A good rent roll will provide more confidence to your lenders and mortgagors.
How do I create a rent roll if I don’t have property management software?
Simple.
Create it in Excel.
Or even easier, download a copy of my rent roll template here.
Complete Initial Set up of your rent roll
Step 1: Gather all your leases.
If you inherited tenants without leases, or have not used leases in the past, this is a great time to create new leases for everyone.
Step 2: Enter all your tenant’s information into your rent roll.
Step 3: Identify the missing information in your rent roll.
Step 4: Contact your tenants to gather this missing information.
This is especially important if the information missing is lease start dates, move-in dates, security deposits, or what the rent includes.
How do you maintain and use the rent rolls?
Every month update the rent roll to remove tenants who have moved out, tenants who have moved-in, rental increases, or anyone who has given notice. Once you have reviewed the rent roll, save a copy with the file name for the current month. This way if you ever have a dispute or need to go back to this rent roll you have a record of the status of all units at that point.
Here’s a screen shot of how our directories look:
Each month print off the rent roll and physically compare it to all the rents that have been received. Double-check that everyone has paid all of their rent. We do automatic withdrawal for all of our rents, and in the past I actually missed someone’s rent for two months. I had to go and ask for back payment of rent. Luckily they obliged and paid.
Once you’ve reconciled the rent roll and the rents received file this physical copy of the rent roll in the filing cabinet.
That’s it. That’s your Rent Roll.
Next Action Steps:
- Download our Rent Roll here
- Start filling out your rent roll tomorrow