What is a Rent Roll (Including a Free Rent Roll Template)

The rent roll is one of the essential pieces of information real estate investors have at their disposal, chief among all other records, studies, and financial reports.  

Let’s go through how rent rolls function in this article, along with how to estimate an income-producing property’s genuine value before you sell, acquire, or apply for financing. 

What Is a Rent Roll 

The rent roll is a detailed record of each unit in a rental property. Many investors and banks seek a rent roll as part of their due diligence procedure because it is a crucial document in real estate transactions. It is advised that landlords maintain an accurate, current rent roll for each of their properties and their entire portfolio due to its adaptability and utility. 

If a unit is occupied, who is the tenant, the tenant’s payment history, the security deposit that is being retained, the length of time the tenant has been residing at the property, and the expiration date of the present lease are all details that can be found on a rent roll.  

Lenders, property managers, and investors in rental property use rent rolls to evaluate the flow of income from a particular rental property. Rent rolls are prepared for all rental real estate assets, including single-family homes, multifamily structures, commercial and office buildings, and mixed-use projects. 

The information can also be included in a few crucial financial performance calculations that every landlord should know. For instance, internal rate of return (IRR), capitalization rate, and gross rent multiplier (GRM). 

Why a Rent Roll Is Important 

When you invest in rental property, you get the income the property brings in. Because of this, a real estate investor may frequently perceive a turnkey rental property already generating money as having a higher value than a vacant home looking for a tenant. 

If correctly set up, the rent roll of a property will give a real-time picture of the gross cash flow the asset is producing. But more crucially, a rent roll will enable you to determine whether the gross rental income is anticipated to increase, remain flat, or decline in the near future.  

Rental property owners, prospective buyers, and lenders can quickly determine whether the gross income recorded on the P&L is authentic and accurate by comparing the rent roll to the income section of the profit and loss statement (P&L). 

How Buyers Use Rent Roll 

The rent roll will reveal the amount of rental revenue that should and is being collected if you are a buyer looking at a home that is up for sale. You may find out from the rent roll report how probable it is that the property will continue to generate income. 

Will Cash Flow Continue? 

Imagine, for instance, that you are purchasing a four-unit fourplex in September and that three of the four leases are set to expire at the end of the year. If every lease cannot be renewed for at least the current rental rate, you are sure to have negative cash flow come January. 

So that the property continues to bring in at least the current rental income after you close escrow, a wise buyer would make it a condition of closing that the seller renews the leases about to expire. 

Is the Rent Being Paid on Time? 

You can determine whether a renter has been paying rent in accordance with the terms of their lease agreement by examining the rent roll. Returning to our fourplex, the same renters may have occupied the property for the past two years. 

Yet, if two of the four renters have consistently paid late this year, the chances are that one of the two tenants will “go bad” and depart or get evicted sooner than later. 

Can You Increase Cash Flow? 

Before you purchase the property, review the rent roll to find any hidden opportunities to increase your monthly income. For instance, you can raise the rents to market level if the current rentals are drastically below market and the lease is about to expire. You can easily let the lease run and find a new tenant prepared to pay fair market rent if a present tenant cannot pay the higher market rent. 

How Sellers Use Rent Roll 

By comparing the fair market rent to the rate, the tenant is already paying, raising the rent could potentially increase the home’s worth. A seller that strategically extends the lease may be able to sell the property at a better price if the tenant’s lease is about to expire in the next few months since the renter has been “stabilized” for an additional 12 months.  

This is because some buyers are more ready to spend more on a rental property when they know a reliable future revenue stream. 

How Landlords and Property Managers Use Rent Roll 

A rent roll can be used in much of the same ways that a buyer does by landlords and property managers that manage rental properties: 

• You can quickly determine from a current rent roll whether a renter is behind on their rent, charge a late fee, and notify the tenant in writing of the late payment. 
• When the lease is renewed, compare the rent received from the tenant to the going rate in the market to see if there is potential for an increase. 
• Determine which leases are about to expire, and start advertising the space for rent if the current tenant decides not to extend. 
• To determine if there is enough money available in case the renter causes damage to the property beyond regular wear and tear, review the refundable security deposit provided by a tenant. 

How Lenders and Tax Collectors Use a Rent Roll 

A rent roll is used by lenders to determine the property’s past, present, and projected income. For instance, if a property has produced consistent rental income over the past few years and the tenants are seasoned, a mortgage broker or lender may perceive little risk in making a loan. 

The property management business, the tenant screening procedure, or the rental property itself may be at fault if, on the other hand, there is a history of significant tenant turnover and a rising vacancy rate. 

In many regions, landlords have to get a monthly rent or usage tax from the renter, which they then have to give to the regional tax authority. The tax collector will examine the rent roll if the landlord is audited to determine if the landlord has been properly collecting and remitting the required amount of local rental tax. 

How to Make a Rent Roll 

A rent roll can be made for the entire rental property portfolio and each property. Regardless of the type of property, the following details are always included on a rent roll: 

Property Overview 

• Property address 
• Owner name or property management company 
• type of property (multifamily, single-family, short-term rental) 
• Market area or zoning (urban, suburban, commercial residential, mixed-use) 

Unit Data 

• Unit number (such as #1 or A) if the property is multifamily 
• Number of bathrooms 
• Number of bedrooms 
• Size of lot 
• Square footage 
• Other amenities (HOA, common-area playground or greenbelt, swimming pool, etc.) 
• Extra features (garage, backyard, storage shed, etc.) 

Tenant Details 

• Tenant name 
• Monthly rent 
• Lease start date 
• Lease end date 
• Total occupants 
• Rent due date 
• Date rent paid 
• Amount of past due rent 
• Additional rent (for instance, pet or appliance rental) 
• Prepaid rent ( for example, first and last month) 
• The landlord gives rent concessions to the tenant 
• Security deposit held by the landlord 

Conclusion 

An accurate rent roll provides lenders, purchasers, investors, and property managers with a current view of the total rent being received from each tenant. To create a rent roll for the entire portfolio, real estate investors can first create a rent roll for each property. 

Rent rolls offer valuable details about the property’s past, present, and projected gross rental income. Financial measures like cap rate, ROI, and gross rent multiplier (GRM) are also calculated using data from a rent roll.  

Now that we understand the importance of rent roll in CRE investment, the next step is to sign up for an account on Finance Lobby, the top financing marketplace for commercial real estate. We connect commercial mortgage brokers to lenders to make the perfect-fit deals. Sign up for an account today.