The rent roll is an important tool for multifamily property owners or investors for a variety of reasons, and chief among them is that this document makes it easier to analyze the financial potential of a property. Moreover, a rent roll will be crucial when you're applying for multifamily investment property loans because the lender will want to know the potential of the dwelling to ensure it’s a sound investment.
So what exactly is a rent roll? Quite simply, it’s a list that details information about each unit, the occupants, the rent, the leases, deposits, and any other sources of income on the property. By examining the information in the rent roll, you can see where there are upcoming vacancies, who’s paid up and who’s behind on rent, your gross monthly rental income, and much more. If you’ve never prepared one of these documents before and aren't sure where to start, here are three great tips to help you create your own multifamily rent roll and put yourself in a better position to secure multifamily commercial loans.
1. Be Exact in Detailing the Units
A rent roll should include a great deal of information about each unit because that’s the only way to see the full picture when you're analyzing the property. The first thing you want to include is the unit number, size, and type. For instance, apartment 1A is a 750-square-foot unit with one bedroom and one bathroom. It’s also a good idea to include the resident’s name. Finally, you may also want to create a column for remarks where you can make notes about the unit, such as when it was last renovated, improvements that have been made, and other pertinent comments.
2. Don’t Forget Additional Income
Once you’ve written down all the descriptive information about the units and their tenants, document the monthly rent for each unit. You should also have separate columns to indicate what's been paid for the month or if there is a balance owing (if any tenants are behind on rent). However, rent isn't the only source of income with multifamily properties, and you should also make note of any other income you generate from residents through charges and fees. Examples include:
Along with giving you a good idea of the full financial potential of the property, this section of the rent roll will also provide a record in case any tenants have recurring problems with late rent or other payments, and provide an accurate picture of balances owing.
3. Include Lease Terms and Dates
The last thing you should include on your rent roll is information about the leases your tenants have signed. The relevant things to include are the date the lease came into effect, the end date, and the term. This is vital because it will help you forecast upcoming vacancies, prepare for upgrades and renovations, and show you if there have been regular vacancies with particular units that could indicate a problem.
A rent roll is important for any multifamily property owner, especially if you're looking for apartment financing. Lenders will want to see a rent roll before approving multifamily investment property loans to ensure the investment is safe, but the document also provides you with critical information about your property, your income, and your investment. If you're looking to invest in real estate, apply for your multifamily commercial loan today to get started on your next project.