What is a Rent Roll?
Rent rolls are reports that give landlords deep insight into the financial performance of each rental unit and for their entire rental property portfolio. Here, we will discuss what a rent roll is, where the data for the rent roll comes from, and how to use a rent roll. We will also analyze a sample rent roll. Read on to learn more about this essential tool every landlord needs to know about.
What Is a Rent Roll?
In its most basic form, a rent roll is a list of your rental units, along with the following information for each unit:
- Tenant name
- Lease start date
- Lease end date
- Monthly rent
- Payment histories
- Other fees charged on a monthly basis
Most rent rolls provide significantly more information than the basic list above. Rent ledger software can usually provide a rent roll report or you can use a rent roll template in a spreadsheet. By analyzing the rent roll, landlords can make informed decisions about rent increases, lease renewals, and property renovations.
Why Is a Rent Roll Important?
The rent roll shows landlords the income produced by each rental unit. By looking at the rent roll, landlords can quickly see if a tenant is consistently late on the rent. This lets a landlord know if they should warn a tenant or if eviction proceedings are necessary.
The rent roll will show when a rental unit is vacant. It will also show if tenants often don’t renew their lease in the particular rental unit. These factors are evidence that something is wrong with the unit. You may need to make repairs or renovations to the unit.
What Data Is Needed for a Rent Roll?
A comprehensive rent roll includes:
- The property address
- Whether the property is a single-family dwelling, apartment, commercial property, or other type of property
- Square footage of the unit
- Number of bedrooms and baths for a residential unit
- The tenant for each rental unit, along with their contact information and their move-in date
- The lease start date and lease end date
- The security deposit amount
- Any addendum to the lease
- The monthly rent amount
- The due date for the monthly rent
- Tenant payment history
- Tenant late payments
- Tenant bounced checks
- Tenant outstanding balances
- Information on vacant rental units, including how long they’ve been vacant and marketing expenses to fill the unit
- Maintenance requests for the unit along with repairs and improvements made to the unit
Where To Find Rent Roll Data
Most of the data for a rent roll comes from a landlord’s rent ledger. But before the data gets into the rent ledger, it comes from other sources like the lease. The lease agreement provides important information, such as:
- The monthly rent amount
- The monthly due date
- Late fee calculations
- Returned check fees and procedures
- The security deposit amount
- The lease start date
- The lease end date
Tenant applications provide important data about tenants such as their contact information. Landlords enter this information into the rent ledger so it can be in a rent roll report.
Ongoing entries into the rent ledger provide the data for:
- Payment histories for tenants
- Late fee amounts applied to tenants
- The date of any late fee applied to a tenant
- Repair and maintenance logs
Example of a Rent Roll
There isn’t a standard design that all rent rolls have. These are flexible reports customized to the user’s preference. Because of limited space for columns within the margins, we will use a relatively basic rent roll example.
This rent roll could be a little more detailed. For example, it would be nice to have a column for the move-in date. Here, since all the lease start dates are within the last year, we can conclude that these rental units are either newly constructed units or at least some of the lease start dates are lease renewal dates. With a move-in date column, we could see the critical data showing how long the same tenant has lived in a unit. Longer occupancy by the same tenant with on-time payments shows stability. The more stable the rent flow, the lower the risk.
Unfortunately, three out of the five tenants — 60% — were late in February. But all tenants paid on the due date in March. This could represent a anomaly based on excessive Christmas expenses coupled with waiting on tax refund money to come in. It’s interesting that all tenants paid on the first day of the month in March. Without year-by-year comparison data, we can’t tell if the late payments in February were an anomaly or not.
The good news from this rent roll is that only one of the five rental units has a lease end date within the next three months. It’s Jeff Spicoli in Unit 103. This is the unit that pays the least monthly rent amount, and there have been complaints about loud music coming from Mr. Spicoli’s apartment. The landlord is planning on seeking a new tenant for this unit and doesn’t expect a difficult time filling the vacancy even if they charge a higher rent rate.
How Do Landlords Use a Rent Roll?
The main way landlords use a rent roll is to track income — on a per unit basis and the total across all units. By tracking income, landlords are not only monitoring financial performance, but are also identifying trends. For example, the rent roll may be the first report to show recurring late payments by a tenant.
The rent roll helps landlords with planning. For example, if an unusually large number of lease renewals are coming up within the next three months, landlords will know they need to work to find out who plans not to renew. That helps them know how much to put into marketing in order to avoid vacant units. Vacant units can lead to negative cash flow and no landlord wants that.
The rent roll can also help spot excessive tenant turnover in a unit or unusually long vacant periods for a unit. This often means a unit needs renovation in order to attract stable tenants. On the other hand, if tenants rarely move out of a unit and/or the unit quickly re-leases after a tenant moves out, demand for the unit is obviously high. With high demand, it’s probably a good time to increase the rent.
Once a landlord has examined trends shown by the rent roll, they’re in a much better position to forecast future occupancy, income, and expenses. With the accurate forecasts, landlords are much more likely to keep a workable budget.
Use Cases for a Rent Roll
Landlords can use their rent roll as evidence in an eviction proceeding for nonpayment of the rent. The rent roll will show the pattern of late payments and usually the outstanding balance. But courts aren’t the only place landlords use the rent roll as evidence.
Lenders, investors, and potential buyers also see the rent roll as evidence of whether the properties are a good for investment or loan purposes. They aren’t only looking for the income production of the properties. They’re also looking for whether the rental units have seasoned tenants. A seasoned tenant is one that has lived in the unit for at least six months and always pays the rent on time.
By looking at occupancy and payment histories, these parties can determine the stability of the income stream. Of course, where rental income varies widely over different time periods, lenders and investors will see more risk. For a lender, more risk means they will charge a higher interest rate or deny the loan.
For a potential investor, they’ll want a higher return on investment if they consider a property as a high risk. A potential buyer of the rental units will pay less if they see the rental income as unstable.
Another issue a potential buyer will notice from the rent roll is upcoming lease renewals for the next couple of months. If a relatively high percentage of the rental units have expiring leases within the next few months, the buyer may demand a reduction in the purchase price unless the current owner gets the leases renewed before the closing date.
- Rent rolls are essential reports landlords need to optimize the management of their rental units
- Rent rolls provide evidence for landlords when seeking loans or investors
Rent rolls help landlords make decisions about their rental units and their tenants. But a rent roll has limited use for assessing the risk of a loss should a disaster strike your rental units. Because of the unpredictable nature of disasters, it’s a good idea to have affordable and reliable landlord insurance on all your rental units.
Why is it called a rent roll?
Can rent roll assess risk?
How is rent roll different from rent ledger?
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