What is a Rent Roll?

Homeowners usually buy houses based on the price-per-square-foot, but real estate investors think a little differently.  When it comes to purchasing property, real estate investors are interested in the potential cash flow a property may generate. A popular tool used to evaluate profitability is called a rent roll.

A rent roll is a consolidated report that tells an investor who the tenants are and how much they pay in rent.  A rent roll also discloses which tenants have paid their rent, and when the last rent payment was received.

Additional information on a rent roll includes if a unit or home is occupied (important for multifamily investors or single-family home investors with a large portfolio of rental properties). A rent roll details tenant occupancy length, lease expiration data, tenant payment history, and the amount of refundable security deposit.

Rent rolls can be created for any type of income-producing property – such as a single-family home, a multifamily property, or a short-term rental.  A consolidated rent roll report may also be used for groups of rental properties at the portfolio level.

Benefits of Having a Rent Roll

Real estate investors interact with property managers, lenders, and prospective buyers when the time comes to sell. Each party uses the rent roll report to see the current rental income a property is generating. The rent roll also may be used to understand whether current rental income might increase or decrease.

1. Benefits for Investors

The rent roll helps owners and investors maximize cash flow by revealing if a tenant is past due on the rent and if late fees should be assessed. If a tenant has a history of paying the rent late, it may be an early warning sign that it’s time to start looking for a new tenant. A rent roll will also show which leases are coming up for renewal in the next few months so that the tenant may be signed to a new lease well before the expiration date.

2. Benefits for Property Managers

Property managers handle the day-to-day details of rental property ownership, such as rent collection, tenant communications, and making sure the property is well maintained to help value increase over the long term. By using a rent roll, property managers can see if rent is paid in full and on time.

3. Benefits for Lenders

Lenders use the rent roll to help calculate the debt service coverage ratio (DSCR) when a borrower applies for a rental property loan or when the current owner wants to refinance. The DSCR tells the lender how much additional cash is left over after the operating expenses and mortgage payments have been paid. 

DSCR is calculated by dividing the net operating income (NOI) by the mortgage debt service payment. A lender determines the NOI by taking the gross rental income reported on the rent roll and subtracting the property operating expenses reported on the income statement.

4. Benefits for Buyers

Buyers also benefit from an accurate and up-to-date rent roll. When a rent roll is properly prepared, it is easier for a buyer to predict if future rental income will change based on the payment history of the tenants. Buyers can also use the rent roll when conducting due diligence and analyzing possible real estate investments.

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

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