How to Read a Rent Roll

Following are eight ways to measure financial outcomes from the rent roll. There are numerous metrics to value a multifamily asset from revenue per square foot to replacement value.  This writing is focused on the rent roll and various means to measure the quality of the income stream derived from the existing, in-place tenant base. 

Baseline Data.  When beginning a review of the rent roll ask for two copies; one for the current month and one for the same month from the previous year (two years if you can get it.

Turnover.  While a nice catch phase, in our business increases in turnover means we are burning cash.  With the baseline data we can now determine turnover and inquire about the fate of those tenants no longer on the roll.  What became of them?   

Revenue and Revenue Growth (Rent Growth).  Minus the layered view of revenue including Gross Potential, less vacant, less concessions, plus utility income, plus garages... yada yada.  How much RENTAL REVENUE was obtained  for the current month versus for the same month one and two years previous? 

Renewals and renewal rates. Renewals are the cornerstone to stability.  What is the year-over-year renewal rate?  A number north of 75% is very good.  High renewal rates converts to a low turnover rate.  Low turnover converts to high gross margins and less turnover expenditures. 

Lease Start dates/Lease end dates.  This is separate and distinct from renewals.  This category says much about the potential of un-locking value.  What is the average length of tenancy?   Is it 12 months or 12 years?   

Collections Activity.  Collections refers to only collections of rent- not any other category.  We are focused only on the rent roll.  What percentage of rents are collected as of the first of the month? 

Late fee revenue.   Late fees can be an indicator of  future collections.  This revenue is a mechanism  to enforce timely payment of rent.  The real target inquiry is to determine the quality of the under-lying tenant base.

Evictions Activity.  Per the rent roll, how many evictions  were performed in the last few years?  What was the end result on each one; voluntary move once served  or  action necessitating legal fees?   What was the cost to turnover evicted units? 

Can you add to this list?  Please let us know through your comments.  Thanks! 

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