Tightening Up Your Rent Roll
As your rent roll grows, opportunities arise to tighten up your rent roll by shedding properties that aren’t desirable. Shedding properties can have a significant positive impact on the value of your rent roll. However, the most significant impact will be profitability. By tightening up your rent roll, you can remove C class properties, remove C class landlords, and remove properties outside your core farming area. Let’s look at these three in more detail.
C class landlords are landlords that might be undesirable. Perhaps their investment practices don’t align with your business ethics. They might be reluctant to do simple repairs, or they may be a low fee landlord that falls below your profitability waterline. These landlords generally cost you both time and money and should be reviewed.
Shedding properties can have a significant positive impact on the value of your rent roll.
We don’t need to write these landlords off altogether. However, we do need to action them. If they are a low fee-paying landlord, consider revising their fees using a fee increase program to get them to a profitable level. If they are culturally misaligned with your business ethics, then maybe tag them to be sold from the rent roll. I’ll come back to this shortly.
C class properties are properties that haven’t been well maintained and often attract undesirable tenants. These properties cost your team an enormous amount of time managing repairs and rent arrears and often tenants that are hard or unpleasant to deal with.
If they are culturally misaligned with your business ethics, then maybe tag them to be sold from the rent roll.
You have two options with these properties. You can coach the landlord into selling the property and replacing it with a new one. This is a win, win, win. You make a commission on the sale and a commission on the purchase. You also end up with a modern property that requires less work and attracts quality tenants. The other option is to flag them for sale from the rent roll.
Properties outside of your core farming area cost your team extra time to manage. They have to travel to them repeatedly during the leasing phase. Travel time makes ingoing, outgoings and routine inspections a burden. They could potentially manage two to three other properties in the time it takes to manage one that is a distance from your office.
Properties outside of your core farming area cost your team extra time to manage.
You also have two options with these properties. Like the C class landlords, you can attempt to increase their fees to above market value to make it worth holding onto the management. This isn’t unreasonable, as landlords will pay higher fees if they believe you deliver a valued and trusted service. Not all landlords are price sensitive. The second option, like the others, is to flag these properties to be sold from the rent roll.
This isn’t unreasonable, as landlords will pay higher fees if they believe you deliver a valued and trusted service.
At first thought, you may think the best way to get rid of these properties is to sack these landlords and get rid of them. However, your competitors are always on the hunt for cheap properties. I would encourage you to package all the properties you have flagged for sale and sell them to your competitor.
A good clean out of these undesirable properties from your rent roll will positively impact both your profitability and your team’s sanity.