When it comes to owning properties as a landlord or running them as a property manager, you often need a wide range of documents to compile and organize. Many of them include the financial side of the property, especially if you are renting them out. One of these documents is a rent roll, which is extremely important in helping compile valuable information about how much monthly and annual rent you receive.
However, many people need to be made aware of what a rent roll is and how it can be quite important in assisting with other financial performance formulas. That’s why we’ve put together this guide to help you with the topic, so you can start creating rent rolls for your properties.
What is a rent roll?
A rent or rental roll is a simple document that displays all the information surrounding how much rental income you receive from a property or real estate asset. It will often involve the total amount of monthly rent you receive from your tenants each month and the annual income you receive from the property.
It doesn’t matter what type of real estate the rent roll is for. It can be for anything that produces rental income, such as single-family houses, commercial property, and multifamily buildings. The information from a rent roll is often displayed in an easy-to-read fashion, and the numbers are used in other rental property financial performance formulas such as return on investment (ROI) and gross rent multiplier (GRM).
How does a rent roll work?
There are different ways that a rent roll can be compiled. It can either be used for a singular property, or you can put together a sort of ‘master sheet’ rent roll, which displays the rental income information about every property investment you have.
The information included in a rent roll can often vary, depending on the individual situation and the type of property, but most of the time, they will include the following information:
- Property information
This section will include information such as your name (if you are the property owner) or the management company that looks after the property. You will also include the address, type of property, and zoning area.
- Unit data
While you already have wider property information in the last section, the unit data is often much more specific. It will include information such as the square footage of the property, as well as the number of bedrooms and bathrooms and any additional features like a garden or garage.
- Tenant information
Here, you’ll include all the necessary information about the tenant or leading tenant of the property, including their name, how much rent they pay, when their rent is due, and any other information about their lease.
- Rental income
This last section will outline how much rent you receive each month from your tenant and the total annual rent you collect. These numbers can also include any extra rental income and annual fees you may have charged the tenant.
Rent roll example
Anyone can make a rent roll quite easily, even if you haven’t done it before. You only need some spreadsheet software, such as Microsoft Excel or Google Sheets, and possibly a template to help you out.
For a single-family property, you can simply present the information by placing the title of the information in the first column and then writing the required information in the column next to it. You may also place the titles on the first row and the answers below.
If you are confused, you can always get a helping hand from property management software like Hospiria, which will place the information automatically and create your rent roll.
Who uses rent rolls?
There are three main groups of people who use rent rolls:
Property managers and landlords
Of course, if you’re a landlord or a property manager, you will want to know how much rent you’re receiving from a tenant. A rent roll can provide these people with this information and offer some caution to some tenants. For example, if a tenant is starting to pay their rent late regularly, you’ll be able to pick this up by looking through their rent rolls.
Of course, sometimes there may be reasons out of their control why they can’t pay rent, so you shouldn’t penalize them for a one-time late payment. However, a rent roll can help you pick up any patterns, and red flags which may suggest that they need to be evicted and the property should be marketed again.
Real estate investors
If you’re a real estate investor and you’re considering purchasing a property to rent out in the future, then you want to ensure that it is going to be a good investment. A rent roll can allow you to do this as you can verify how much rental income the property is receiving at the moment and if there have been any cash flow problems in the past.
A rent roll can provide potential investors with information on how much they could earn if they purchase the property. They may also be able to use it against a comparative market analysis to see whether there is room for an increase in rent too. They can also put together some preventative measures to avoid problems in the future.
Mortgage brokers and lenders
Last but not least, rent rolls are also used by mortgage brokers, lenders, and banks when they consider giving out a loan to someone who wants to purchase a property, provide a cash-out refinance, or help someone open a home equity line of credit (HELOC).
The rent roll will provide the mortgage brokers and lenders with information about how much income the property has generated in the past and how much potential it has in the future. It helps them make their decisions, so it is useful to have your rent roll with you if you’re someone requesting a loan or something else.
How to create a rent roll
If you want to create your own rent roll, you need to know specifically what is included in one. We have already provided you with a rough overview, but you will need to include this.
Think of the following as a template:
When you first put together your rent roll, you will need to include some ‘identifiers’ about the property at the top. This will include the address of the property and any contact information about the landlord or property manager.
After the first identifiers have been filled out, you can then start listing details about the area the property is located in. This includes the average income of other landlords and average property prices.
As mentioned already, you will also need to include the unit data of the property, with information such as:
- Unit number
- Square footage
- Number of bedrooms
- Number of bathrooms
- Lot size
- Additional features
- Other amenities
If there are multiple flats or offices on the property, then you will also need to include the above information for every unit in the building. Other information that will be useful to include is how much work is due on each of the units, and make sure you update this section regularly. You only need to include things such as the unit number if it is not a single-family household.
Most of the tenant information you include will be what you have already gathered from your tenancy agreement, but you will have to transfer it to this section of your rent roll. Information about the tenant and any specific rental agreement data should be included:
- Name of tenant
- Monthly rent amount
- Additional rent amount
- Rent due date
- Date rent paid
- Past due rent
- Prepaid rent
- Security deposit
- Lease start date
- Lease end date
- Rent concessions
The last part of any rent roll will display the vital information - how much monthly and annual total rental income you have received for the property from your tenant. When you state the total monthly rent collected, you will also need to include any extra rental income in the contract, such as a pet fee, additional storage fee, or parking fee.
The total annual rent will be mentioned at the very end and include any extra rental income mentioned above. You can also include any annual fees that you charge on the property to the tenant, such as deep carpet and furniture cleaning, pest control, or landscaping and gardening.
A rent roll may seem like a basic document, but it is actually incredibly important in predicting future rental income and helping with other vital property decisions such as loans and investments.
If you still need some assistance with creating your rent roll, especially if you have multiple properties, then you may want to contact one of Hospiria’s representatives. We will talk you through our software and how it can create a rent roll for you.
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