While purchasing a rent roll can be an effective strategy for increasing cash flow and encouraging business growth, doing so comes with risks if you don’t do it properly, warns O*NO Legal Founder Kristen Porter.
That’s why the real estate-focused legal firm has released a free eBook, How To Buy A Rent Roll The Right Way, to ensure those who want to push their asset forward, can do so with minimal risk.
“The buying process is complex,” Ms Porter said.
“Without careful consideration you may end up jeopardising your greatest asset – your real estate business.”
Done right, it is worth it, she said.
“That’s why we’ve put together this legal guide to ensure you know exactly what to do when it comes to buying your next rent roll,” Ms Porter explained.
She said one of the biggest benefits of buying a rent roll is the instant cash flow.
“When you purchase a rent roll, you’re essentially buying a portfolio of rental properties already generating income, meaning you’ll have an immediate – and regular – source of income,” she noted.
Buying an established rent roll also means you’ll have an immediate portfolio of properties, and an established client base.
“Best of all, your rent roll will become a valuable business asset for you. When it comes time to exit your agency or sell it down the track, a sales-only business may not be worth as much as you think it is,” Ms Porter said.
“Your main selling point will be your rent roll – especially if you’ve managed it well and expanded it.
“Your rent roll can also be an asset that can be borrowed against. This way, your rent roll can act as a security, making it easier to borrow money to fund your growth or investment plans.”
But while there are plenty of benefits, buying a rent roll comes with risks, if you don’t do your due diligence.
“For example, the rent roll may include poor quality properties, which require significant repairs or renovations, leading to high maintenance costs and lower rental income,” Ms Porter said.
“There could also be a loss of owners, if some choose to leave your agency following a change in ownership, resulting in lower income than expected.”
Mismanagement of properties can also become an issue, if the previous owner was providing substandard services to its tenants and/or landlords.
“There could be issues with maintenance, rent collection or tenant management that could impact the profitability of the properties,” Ms Porter said.
“There may be legal issues you need to be aware of too, such as disputes with tenants.”
Like any major investment, research and a thorough evaluation of the potential risks and rewards is essential.
O*NO Legal’s eBook is a great way to start and get you on the right path to owning a rent roll.
“Rent rolls are a fantastic way to grow your agency. Buying a rent roll will lead to an increase in your database, which can result in opportunities to increase sales volumes, specifically when owners in the rent roll want to sell,” Ms Porter said.
“If done right, it’s well worth the effort.”
To access the eBook, click here.