One essential aspect of real estate business is accurately pricing your rent roll.
Rent roll valuation is a critical process that determines the value of the saleable asset in your real
estate business.
Understanding rent roll valuation
A rent roll is essentially a list of all the rental properties an agency manages on behalf of
multiple landlords.
The valuation of a rent roll is crucial for business owners at any stage of business, not only when they are considering buying or selling a rent roll.
Accurate valuation ensures that both parties receive a fair deal, however, while operating your business, it is crucial to strategic planning and goal setting.
Valuation methods for rent rolls
There are two methods used to determine the value of a rent roll, each with its unique advantages.
Market approach involves comparing your rent roll to similar ones that have been sold recently.
Effective for gauging the current market environment, this method’s accuracy depends on the availability of comparable market data.
This method, combined with a secondary approach such as the income approach, focuses on future income potential.
It’s ideal for businesses with consistent, predictable earnings but hinges on the accuracy of financial projections.
This approach evaluates the present value of expected future cash flows, making it suitable for stable businesses with clear financial forecasts and is a method preferred by financiers.
It is important to note that valuers each have their own approach and understanding of rent rolls and finding one that understands rent rolls, rent roll transactions and real estate business is important.
Pricing your rent roll accurately is vital for making informed real estate business decisions.
By understanding the various valuation methods and considering factors, business owners can navigate the dynamic rent roll market with confidence.
