2 Rent Roll DD Checks for Passive Investors to Verify Before Investing

This trick is more for multifamily where your rent roll will be a bit more extensive, if you’re investing in strip centers or retail centers you may just have a few tenants on your rent roll and you don’t have as much move ins and outs so this may not work.

Quick Notes:

Would you rather listen than read? Check out our Podcast

If you’re interested in learning more about passive investments, download our free ebook: The Definitive Guide To Passive Real Estate Strategies

Signup for our weekly newsletter to learn the best topics and stories as it relates to you as a passive real estate investor: https://www.arealminvestor.com/highlights

Interested in investing passively in syndications? Schedule your intro call with us here: Schedule Now!

But, if you’re looking at a multifamily rent roll, many times sellers or brokers will advertise a “proven” value add strategy by using the highest lease amount achieved for a certain layout.

For example, if a 50 unit building is renting 1 bedrooms at $500 but they got 1 lease at $600, they might advertise that $600 is the market rate for all 1 bedrooms which can result in a significantly higher valuation.

And that might be true, but you’ll want to do these 2 really quick checks first.

1: Look at the most recent leases since that increased lease amount
Is it a trend that the new leases have been higher or at $600? Or was it a one off $600 lease and the rest are coming in at $500? That could be a sign that the $600 was a one off and not as realistic for you to lease every unit at that price.

2: Check if that $600 lease came with any concessions
Sometimes you can check on these by visiting sites like apartments.com and you can see any move-in specials they have, or you can just ask the question.

If that new $600 lease included a free month concession, that may not truly bring the market rate up to $600 a month. It actually brings it to about $550 because you can deduct the cost of the free month from the annual amount of that 12 month lease.

Concessions are not a bad thing, we have concessions on a few of our properties currently, but you need to understand the full scope of how new rental rates are being projected and if a proven value add strategy is truly that or if you’ll have trouble duplicating those results through regular marketing