Financial lenders and the real estate industry both use a rent roll report to evaluate, purchase and underwrite rental property. This report is considered part of the due diligence process and is usually provided by the property owner. It’s often in the form of an Excel file but may also be issued as a printed report. Here’s an explanation of why banks and real estate agents use rent rolls.
What Really Is a Rent Roll?
A rent roll provides a list of all the tenants who reside at a commercial property such as a business park complex. It’s important for investors in real estate property to know who the tenants are to gauge future revenue. The report also lets them know how many units are vacant. Here are the types of information found on rent rolls beside tenant names:
- Unit number – The apartment or suite number of a particular unit.
- Unit size – Measured in square feet, unit size can affect rent prices.
- Percent of net rentable square footage – The percentage of square footage occupied by the tenant compared with unit size can affect rent prices.
- Rental rate – The amount paid by the tenant is the rental rate, which can change over time due to various factors. This information is commonly presented in two columns: one for value per square foot and another for total gross monthly rent amount.
- Annual rent – This calculated value reflects the total annual revenue collected for a rental space. This value is the result of the monthly rent multiplied by 12.
- Lease start date – The date upon which the lease becomes effective.
- Lease end date – The date upon which the lease term expires.
- Lease term – The number that reflects the complete term of the lease is usually expressed in months.
- Security deposit – The amount of money being held by the rental business for the tenant until they decide to move.
Importance of Rent Rolls
Rent rolls ultimately give you insights on the health of a commercial property. Here are some of the various reasons why rent rolls are so crucial to bankers and real estate professionals:
- Property income – Grand total of all rent money paid by tenants, which gives investors of the property’s annual net income.
- Number of tenants – An “anchor” is a tenant or tenants who occupy most of the property’s square footage. A rental business that only has one tenant runs the risk of income loss if the renter is unable to work due to an illness or accident.
- When several leases expire – Investors need to be aware of the risks involved with several leases expiring at once.
- Tenant roster – When bankers and real estate agents examine a commercial property that leases space to businesses, it helps to become familiar with each tenant and evaluate their reputation.
- Lease lengths – Many times, long lease terms are preferred by commercial property owners to ensure income will be reliable.
How Brighton Escrow, Inc. Can Help
Real estate rent rolls tell investors and lenders quite a bit about a commercial property that rents space to businesses. If you would like to learn more about rent rolls, contact our experts at Brighton Escrow, Inc. today! We are always ready to answer your questions.