A rent roll is an essential document that allows landlords and others to easily view rents that are due and rents that have been collected on an investment property. It focuses on the gross rent collected, not net rent after expenses, such as a monthly mortgage, insurance, taxes, or utilities.
Keeping detailed financial records is important in the daily operations of an investment property, and it's equally important for potential investors if you're considering selling your property. Rent rolls can help landlords manage their finances and increase profitability, and they can help you sell your investment property when and if the time comes.
What Is a Rent Roll?
A rent roll is a statement of the value of investment rental property. Rental income will largely sustain your investment if it's sufficient, so it's important to pinpoint it down to the dime. A rent roll cites rents that are due, lease terms, and late fees. It's a snapshot of overall expected income and historic income.
The rent roll is a reflection of the income potential of the rental property.
Rent rolls are used by landlords and property managers in the daily management of properties. They can be used to analyze anticipated rental income, the actual rental income collected, and whether there's room for rent increases based on fair market rent in the area.
A rent roll is broken down by unit so it can easily show which tenants haven't been paying rent or which tenants have been habitually paying their rent late. This can help a landlord stay on top of problems and file for evictions if necessary.
How Does a Rent Roll Work?
A rent roll breaks down the rent per apartment unit, and it also gives a total rent amount for the entire investment property. It collects rent data from each individual tenant’s lease agreement and puts it in one, easy-to-read document. The landlord doesn't have to waste time digging up each tenant’s lease to determine rent amounts or lease start and end dates.
Who Uses Rent Rolls?
Any number of individuals and entities can benefit from reviewing an accurate rent roll. Lenders will be interested in seeing the document if you're thinking of refinancing the property—they'll want to know its historic and anticipated income. Certain government agencies might require it, as will any property managers you hire to handle your investment.
You'd also want to see a rent roll associated with a property that you're considering purchasing because it shows its income potential and if the property has been generating stable income.
A prospective buyer will analyze the rent roll as one of the factors in determining if the property could be a good investment. The investor will evaluate the current numbers and also see if there are ways to increase this rental income.
Ways to increase profitability on a rent roll include increasing the tenants’ rents if current rents are under market value or if renovation could warrant a higher rent price. You might also achieve more consistent rent collection through improved tenant screening.
How to Create a Rent Roll
A rent roll can easily be created using a spreadsheet program, such as Microsoft Excel. Simply label the rows and columns with the proper headings and input the data as you collect it.
The information included in the rent roll can vary because it's created to meet the specific needs of the landlord, but a good rent roll includes certain general information.
This will appear at the top of the spreadsheet and will include any identifying information for the property owner and the investment property.
- Name of property owner
- Address of rental property
- Name of property manager/management company if applicable
There should be a dedicated row for each rental unit that contains certain information:
- Unit number: This should match the unit number on the lease agreement, such as Apartment #1 or 3A.
- Square footage: How large is the unit? This information is helpful when comparing rent prices to other units in the area.
- Number of beds and baths: This will help determine if you're collecting the fair market rent for the unit.
- Security deposit collected: How much did you collect from each tenant when they moved in? This amount should not include the first month's rent.
- Rent amount owed: How much does the tenant owe each time rent is collected?
- Rent collected: Break down the date rent was collected, the amount that was collected, and the method of payment.
- Lease start date: Include the date the lease began and when the first rent payment was collected.
- Lease end date: Enter the date the lease ends if there's an end date or if the lease becomes month to month.
- Additional tenant expenses: Note whether the tenant will pay any additional expenses, such as utilities or building maintenance.
- Additional unit information: The landlord can use this section to write any comments about the unit, such as a scheduled rent increase or renovations that have been completed or are scheduled on the unit.
This is the total rent amount that could be collected each month or each year for the property:
- Monthly rent collected: Add together the monthly rents for each unit.
- Yearly rent collected: Yearly rent can be calculated by multiplying the total monthly rent collected by 12.
- A rent roll details specific information about each tenant and unit in a rental property so it can be viewed all in one place.
- A rent roll cites lease terms, rental fees, late fees, and it can include security deposits.
- This can be a critical document for lenders if a property owner wants to refinance, or for investors who are contemplating buying the property.