Understanding Rent Roll: A Landlord's Guide

Learn how rent rolls give landlords and other stakeholders financial clarity on rental property performance.

By
Nichole Stohler
|
Last Updated
December 11, 2023
Understanding Rent Roll: A Landlord's Guide

Do you ever feel like your rental property finances are a jigsaw puzzle with too many missing pieces?

Between tracking income, expenses, maintenance issues, and tenants across multiple units, it's easy for things to slip through the cracks. Important questions remain unanswered: Which units are most profitable? Who pays rent on time? Is occupancy steady or declining?

Having a complete picture of income and expenses is important for landlords but isn't always easy to obtain. That's why a rent roll is a simple yet useful tool for making sense of rental property numbers.

At its core, a rent roll is a master document that aggregates critical tenant payment data into one clear snapshot. Having this centralized view of all leases, rents due, amounts paid, expiration timelines, and balances owed gives you clarity on your property's performance.

In this article, we will cover what a rent roll is, why this tool is valuable for landlords, and how you can use it to maximize financial performance.

What is a rent roll?

A rent roll is a document that outlines the financial status of a rental property. More specifically, it lists each tenant, their unit number, monthly rent, lease details, payment history, and account balance.

So, in essence, the rent roll acts as an organized ledger, allowing landlords to easily track rental income on every unit. It provides a snapshot of the property’s overall occupancy and cash flow.

With this information all in one place, landlords can better manage their property and budget effectively. The rent roll brings clarity to a complex financial equation that includes multiple tenants, leases, units, and amounts due.

Why is a rent roll report important?

The rent roll shows valuable rental income data for property owners, investors, and managers. Here's how you can use a rent roll in your real estate business:

Managing tenants

The rent roll provides tenants' contact information and lease details that help landlords efficiently communicate with tenants, confirm they're meeting lease terms, and promptly address any maintenance issues. It also aids in proactive lease renewal and tenant retention efforts.

Financial planning and forecasting

A major benefit of having all your rental income data in one place is being able to do effective financial planning and forecasting. The rent roll allows rental property investors to budget, manage costs, and set financial goals realistically by presenting data on income, expenses, balances, and cash flow trends.

Analyzing rental performance

A good rent roll provides you with information for analysis of rental income and unit performance. Rental property professionals can evaluate rental rates, occupancy, historical income, and pricing strategies to identify opportunities to increase rents, boost occupancy, and ultimately maximize gross rental income.

What is in a rent roll report?

While rent roll formats can vary slightly, most contain these major categories of information:

  • Tenant details: Name, unit occupied, contact details like phone/email.
  • Lease terms: Move-in date, length of lease, renewal date, etc.
  • Rent: Monthly amount owed, including any specials.
  • Payment activity: Ledger of payments made and dates received.
  • Account balance: Running tally of the amount the tenant owes.
  • Unit details: Square footage, bed/bath count, accessibility features, etc.

Additionally, more advanced rent rolls may track extra data columns such as:

Keeping all this information in one centralized location allows the property owner to gain a comprehensive financial view of the property. You can instantly check a variety of facets on each unit and tenant.

Over time, rent rolls can help you identify issues, recognize positive or negative trends, and make decisions. It transforms chaotic rental finances into an organized system the landlord or property management company can understand, trust, and utilize to maximize returns.

Who uses a rent roll?

Various stakeholders use a rent roll report, including:

Buyers and sellers

Both buyers and sellers heavily rely on rent rolls when conducting real estate transactions.

  • Buyers look at the rent roll during due diligence to determine income stability and potential. They can assess if rents are below market rates and whether there's an opportunity to increase rent when leases expire. When properties are below fair market rent, it provides an opportunity for real estate investors to add value and increase net operating income.
  • Sellers leverage detailed rent rolls to showcase reliable rental income that supports property valuations. Key aspects they want to demonstrate to attract buyers include:
  • Consistent on-time rent collection.
  • Low vacancy rates and quick turnovers.
  • Tenant longevity and high lease renewal rates.
  • Rosy projections for future rent increases.

Backing up claims with documentation builds trust in the figures when negotiating the selling price. Sellers may even have their CPA certify that property revenues match the rent roll, as this verifies the investor can expect the gross income reported during a sale.

Property managers and landlords

As hands-on overseers, property managers and landlords rely heavily on the rent roll document for day-to-day rental operations.

The consolidation of tenant and income documentation provides a more straightforward way to track potential issues like late payments or lease violations. Managers also minimize vacancies and maximize returns by monitoring turnover rates.

The main roles rent rolls fill for landlords and property managers are:

  • Monitoring tenant issues.
  • Mitigating lost rents.
  • Optimizing occupancy.

Mortgage brokers, lenders, and banks

Rent rolls are used by mortgage brokers, lenders, and banks when evaluating risk levels before funding real estate loans.

These entities closely analyze rent rolls to gauge these defining factors of viability:

  • Income sufficiency: Lenders verify that current and expected rents noted provide adequate monthly income to cover proposed mortgage payments and typical operating expenses. Projects that can comfortably carry debt generate less default risk.
  • Income stability: Lenders review rent roll details to confirm stable rental earnings over the long term. This verification provides confidence in funding real estate loans.
  • Cash flow potential: Documentation of all total rental income and expenses allows lenders to project expected cash flows.
  • Tenant stability: Details on lease terms, renewals, and retention confirms that tenants are committed long-term and unlikely to suddenly terminate their lease.
  • Financial transparency: Documentation builds trust by providing a clear, truthful outlook on the property's overall financial health.
  • Risk assessment: The multiple elements outlined above feed into the lender's overall risk analysis on the likelihood that loans will perform as expected.

While individual lenders may weigh some factors as more important than others, most will conduct an evaluation across all key areas of the rent roll documentation.

Good record keeping shows lenders that an owner is on top of things. Real estate investors who properly document property finances tend to manage properties more effectively and stay atop of potential problems. This careful oversight gives lenders added peace of mind.

Managing rent roll data

There are two primary methods for compiling and managing rent roll data: software automation or manual documentation:

Comprehensive landlord software

Azibo offers end-to-end property management software that simplifies tracking all core data points for rental properties.

Azibo's features that facilitate rent roll aggregation include:

  • Cloud storage: Centralized storing of tenant documents like leases and maintenance requests online for easy access.
  • Financial management: Tools for tracking property income and operating expenses to inform budget decisions.
  • Custom reporting: Built-in reports offering visibility into metrics like occupancy rates and rent collected.
  • Managing rent payments: Processing and tracking rent payments and documenting the security deposit from tenants.

With centralized documents, reporting, and cash tracking, Azibo enables landlords to view a complete rent roll via a unified dashboard. It saves significant manual effort in piecing together spreadsheets and information from disjointed sources.

Manually tracking data

Manual rent roll documentation involves frequently sourcing details from several sources, such as:

  1. County tax assessor: Provides details on property size, lot size, and zoning.
  2. MLS listing information: If you purchased the property through a real estate agent, this source gives historical sale data and property features.
  3. Appraisal report: Property data, including room count, size, and other physical attributes.
  4. Lease agreement and tenant files: Separate files that contain tenant names, rental rates, terms, and payment histories.
  5. Profit and loss statements: Monthly and annual gross income from the property and overall financial performance.

What is rent roll in real estate?

At first glance, rent rolls simply present dry rows and columns capturing tenant information, units, balances due, work orders, and countless other details. However, proper organization of these many details brings order and understanding of property performance.

Quality rent rolls pull together key details into an organized overview. Landlords can leverage this centralized information to guide decisions and discover new opportunities, lenders can evaluate financial risks, and prospective buyers can get a sense of how much rental income they can expect.

Rent roll FAQs

What is a rent roll audit?

A rent roll audit examines and verifies the accuracy and completeness of a property's rent roll. The audit aims to identify any discrepancies or potential issues that may impact the property's financial performance.

What is the rent roll expense?

Rent roll expenses are the costs associated with managing and maintaining a property. Tracking and understanding these expenses helps property owners assess their cash flow and profitability.

How do I make a rent roll spreadsheet?

To make a rent roll spreadsheet, create a table in a spreadsheet program like Excel, listing columns for tenant names, property addresses, lease start and end dates, monthly rent amounts, payment history, and outstanding balances. Fill in the details for each rental property you manage.

Nichole Stohler

Nichole co-founded Gateway Private Equity Group, with a history of investments in single-family and multi-family properties, and now a specialization in hotel real estate investments. She is also the creator of NicsGuide.com, a blog dedicated to real estate investing.

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