Quality rent rolls make profitable businesses but securing a better finance deal will make all the difference.
There’s no denying that securing finance for the purchase of an existing rent roll portfolio can be challenging, particularly in today’s lending landscape. Financing for rent rolls is subject to tightened lending criteria, the key is knowing which bank or lender is going to want your business here and now and that’s where we can help.
If you want to purchase a Mercedes you don’t go to a Holden dealer and securing the right finance is no different – some banks specialise in or have an appetite for rent roll finance, many don’t. Some banks will require a 40% loan to value ratio whilst others lend up to as much as 65% – and this changes regularly. Unfortunately, unlike a car dealer you can’t tell from the window signage which banks are going to work for you which is why you need an experienced finance professional on your side.
At Green Finance Group we work with a large panel of banks and lenders everyday and we know who’s going to look at your rent roll business favourably, ensuring you get a better finance deal.
Get a better deal on Rent Roll Finance
Our Rent Roll Finance Specialists will guide you through the purchasing process, help you to secure a great finance deal and minimise the time you spend on unnecessary paperwork and jumping through bank hoops. We can answer all your questions, including:
- How can you reduce the impact of loan repayments on your cash flow?
- How will the number and type of properties under management affect lender selection?
- What is the most cost effective way to structure your loan?
- What will the banks accept as security?
We can even assist you to obtain a valuation on your new rent roll.
To find a better finance deal for your rent roll purchase give us a call on 07 3899 2866 or fill in the form at the bottom of this page and one of our Rent Roll Finance Specialists will be in touch shortly.
How are rent rolls valued?
A Rent Roll Multiplier (RRM) is a formula used to calculate the estimated selling price of a rent roll. This is usually a multiplier of the annual management income for each property.
Annual management income is the total income from management fees and rent collection excluding GST, for a period of twelve (12) months, for each property with a legislatively compliant PAMD20a. It traditionally excludes income from ancillary fees (ie. re-letting fees, administration fees, advertising fees).
Income = $ Rent per week ÷ 7 days x 365 days
x management fee & rent collection commission % (ex GST)
Once an overall average annual management income has been calculated and the rent roll statistics assessed a multiplier is applied. There is no such thing as a ‘one size fits all’ multiplier. The multiplier generally varies from 2 to 3 but in some cities it can be as high as 3.5 to 4. The multiplier varies across rent rolls and locations and is affected by numerous other factors including:
- Average weekly rent
- Average commission
- Number of properties
- Type and condition of properties
- Arrears rates
- Vacancy rates
- Due diligence
- Current court actions
- Type of lessor
- Time rent roll has operated
- Staff and wages
- Supply and demand
- Geographical spread
- Landlord : property ratio
- Ancillary fees and charges
- Current interest rates + economy
- Rent guarantee arrangements
- Compliancy to legislation
Purchasing a Rent Roll? Top 3 Tips for Success
ONE: Get an Expert on Your Side
Find a finance professional with a proven track record in rent roll finance as early as you can. Someone who can help you to define your business strategy and clearly communicate your financial position and subsequent business opportunities.
TWO: Due Diligence
The health of your rent roll is critical. Identifying weaknesses and opportunities early on will help you to make an informed decision with regards value and the ultimate purchase price. The team at Green Finance Group have a proven track record in the property management arena and work with a range of professionals who can assist you with this process. Simply give us a call and we will be happy to point you in the right direction.
THREE: Retention Plan
The successful purchase of your rent roll business is only the first step. Retaining your listings post purchase is paramount and you need to have a strategy in place so you are ready for action the day your rent roll settles. Property management is an industry built on personal relationships so getting in front of your landlords as early as possible will be the key. You’ll need to work hard to ensure a smooth transition, to build trust and loyalty. Personal communication, over the phone initially and then face-to-face, will be best to start with, especially as new management agreements will need to be signed. Have an information pack about your business ready to go and be very clear about your offering and staff contact points. Perhaps consider hiring some of the seller’s staff, even in the short term, to assist with the transition process. Whatever your plan, your guiding aim is to ensure you don’t give your new landlords any excuse to leave.
Whether you are just getting started or are looking to add to an existing portfolio of properties we will work closely with you to secure a competitive finance solution to suit your needs. Call us on 07 3899 2866 or fill out your details below and we’ll be in touch shortly.