Rent roll buyers will pay fair value for a quality business, so take the time to implement these KPIs.
I was in Melbourne recently talking to business owners who are looking to buy and sell. The underlying question whether buying or selling revolves around the question of underlying value.
Here are 4 KPIs that will increase the value of your rent roll...guaranteed.
1. Take Some Time
This might sound strange but we prefer to talk to sellers at least 8-12 months out from the time they list. Take this time to critically judge your performance and areas where you may be able to improve – it may get you many hundreds of thousands of $$$’s at the time of sale.
2. Average Weekly Rent
Ok, so you’ve agreed to take some time to look – but what are you looking for? Start with the Average Weekly Rent. If your averaging $450pw across the portfolio, how do you increase this to $480 or $495 per week? An extra $30 a week in rent across 300-400 properties adds up to a significant amount.
3. Average Commission Rates
Commission Rates and Average Weekly Rents go hand in hand. There is little point focusing solely on increase the rent if you’re commission rates are below your competitors. If you’ve got some stock at 5% and don’t believe you can increase them to say 7%, sell them off to a fixed rate manager at the lower end of the market and replace them with properties on a higher fee.
4. Extra Fees And Charges
If your Total Property Management Income is say $800,000pa, 20-22% of this will come from additional fees and charges. That equates to more than $3000 per week!While the selling multiple x is not applied to these additional fees, they do have an effect on arriving at the multiple x – banks also look closely at additional fees when assessing finance applications.
5. Number of Properties In your Rent Roll
Don’t take your foot off the gas after you’ve decided to sell – the rent roll must continue to grow. If you’re at 300 properties, how do you grow it to 350 in the next 12 months ? An additional 60 properties bringing in say $1450 per property per annum gives you an additional $87,000pa in management income which may equate to $240-260k at sale time.
6. Use Professional Photography
I deal with a number of offices now where professional photography is a non-negotiable cost to owners. For around $240-250 the photographic presentation is attracting higher average weekly rents – and because landlords are getting higher rents, they’re more open to paying higher commission rates. This is a big, and welcomed trend in the industry right now.
In summary, rent roll buyers are not looking for more headaches – they will pay fair value for a quality business, so take the time, implement these KPIs, and the value of your business will grow....guaranteed.