Calculating Rent Roll

8 Replies

I am looking to invest in a multi-family home in Westchester, NY (2-3 units) 

Does anyone have a formula / calculation to evaluate rent roll? 

Thank you,

Nick 

Hi Nick,

What do you mean by evaluating the rent roll? There is not much to evaluate in regards to the rent roll, particularly for a 2-3 unit. You have 3 units and the rent roll shows you how much the lease rent is on each of the units. That's about it. For larger apartments there are a few things I normally would check but it doesn't apply for a residential property like you're talking about.

My "rent roll" is a spreadsheet that shows the each unit is valued at each month, which months were collected, which were delinquent, as well as the tenant name for each month. I also include the mgmt fee for each month and whether the rent collected went toward the first month lease fee.

Thank you to all for responses. what I am asking is some investors use different rent roll calculations to evaluate if the investment is worthwhile. what is a good rent roll percentage compared to purchase price ?

@Nick Lioi

I think what you mean is ROI. Return On Investment. Your rent roll is basically rents collected. If you have 3 units that rent at 1k each, you're rent roll is 3k. Makes sense? Your ROI can be determined by Cap Rate, cash on cash returns, IRR's and so many other ways. Most investors use cap rates and cash on cash. Use this site to do your homework on these. There are formulas on this site for you to learn. Some investors for these smaller units also use cashflow per door. Especially in these expensive markets. If you have any questions or need guidance let us know.

Hi Nick, 

I think your asking for a financial analysis spreadsheet to be used for underwriting. There are some out there you can buy.  @Michael Blank has a good one that you can find on his website. But based on your question and the language you're using I would suggest you start at the basics. @Rod Khleif has a free book to download on his website that is really good. I suggest you go through that and learn the basics and terminology so you can speak the same jargon as everyone else.

Edit: I forgot that you're looking at 2-3 unit residences and not apartments. In that case I would suggest you check out the BiggerPockets calculators. You can find them at the top of this website under the Tools section.

And just to add is you are looking for rental income percentage on the purchase, you will see that on this site many people will choose 2% on purchase price. Ex. If you buy something at 100k it rents at 2k monthly. In our areas you'd be lucky to get 1%. Basically everything is relative.