Rent rolls form the basis of any strong commercial real estate business. They are a tool for organizing, analyzing, and reporting all the crucial data you need to manage your properties. But because they contain so much information, rent rolls can quickly become complex and confusing.
In this blog, we’ll go through the crucial functions of a good rent roll report. We’ll also take a look at some of the most common problems that keep businesses from using rent rolls to their fullest potential.
What is the Purpose of a Rent Roll?
Rent rolls serve as a one-stop spot to find all of the crucial financial data about each of a property’s units. Its primary purpose is to track the rent paid by each tenant in a property, offering a clear view of the property’s primary income. However, it also helps organize additional data including tenant information and rent details.
Because of the amount of information they hold, rent rolls are crucial for good property management.
Rent Tracking
Most obviously, owners and property managers use rent rolls to find and recall this data, making it easy to catch issues and areas of improvement. For example, when a rent roll is updated regularly, it quickly becomes clear if a tenant frequently falls behind on rent. Similarly, businesses can use this to keep their rent rates in market range for better profitability.
Managing Occupancy
Another important use of rent rolls is to see lease details. A neat rent roll allows owners and property managers to see important dates like escalations and especially endings. It’s crucial to know if you have multiple tenancies scheduled to end around the same time, as this can lead to a large drop in occupancy (and therefore income). When you can easily see these dates ahead of time, you can plan ahead to renew leases and find new potential tenants.
Property Valuation
Assessing the income from tenant rent, as well as how rent rates compare to the market, are also essential parts of property valuation. When experts have access to a complete, organized rent roll, they can provide a precise valuation for a property you’re looking to purchase, sell, or improve.
What Information is Included in a Rent Roll?
Rent rolls offer a deep dive into a property’s financial information. Every business will have a slightly different rent roll to track the specifics they need. Let’s take a look at some common parts of commercial rent rolls:
Tenant Information
For each unit, a rent roll lists the name of the tenant business, contact details, and notes on the type of tenant. For example, if they are a retail provider or a healthcare provider. This is useful information as it may explain differences in rent, unit size and equipment, or even lease terms.
Lease Terms
Crucial details including lease start and end dates, escalation agreements, and lease type. This means indicating if the lease is a gross lease, triple-net, or other type, which explains how additional expenses like common area maintenance (CAM) are charged.
Rent Details
Of course, rent rolls also contain the complete breakdown of each tenant’s rent payments. Rent rolls often contain information like the base rent, the payment frequency, the annual total, concessions or special circumstances, and the security deposit amount. It also usually details the amounts owed and paid for CAM and other additional expenses.
Financial Information for the Property
The rent roll helps you see the information for both individual units and the property as a whole. It records what percent each tenant pays of the total income and how much space they lease, and overall occupancy rates. It may even track which tenants have paid rent for the month and which are outstanding. These details offer a clear picture of the property’s financial health.
How to Spot Common Rent Roll Issues
A strong rent roll is vital to a commercial real estate business, so it’s important to keep it updated and accurate. It’s also important to review it regularly to spot any issues. Here are some of the most common:
- Inaccuracies: obviously, if the data in the rent roll is wrong, any conclusions you draw from it will be wrong too. Be sure to pay special attention to lease dates, escalations, and rent amounts to make sure they match what is in the lease.
- Lots of late or missed payments: rent rolls can help you notice if multiple tenants are consistently behind on rent, which can indicate a variety of issues. Common causes include unclear billing and invoicing processes, a pattern of financial stress on tenants, or an outdated rent roll. Keep an eye on rent rolls to catch these patterns early and come up with a plan to solve underlying problems.
- Multiple leases expiring at once: As discussed above, having multiple tenants leave at once can put significant stress on your business. A well-maintained rent roll should help you be aware of this well in advance. With warning, you can turn this obstacle into an opportunity to renew or add high-value tenants.
STRATAFOLIO’s Rent Roll Solution
If any of these issues look familiar, it’s time to explore solutions for a clearer, stronger rent roll. As a property management software designed specifically for commercial real estate, STRATAFOLIO helps you generate organized, complete rent rolls every time. Easily find, analyze, and share important details with lenders and investors. Never worry that an inaccurate rent roll is holding you back.
To learn more about STRATAFOLIO’s rent roll reporting tools, schedule a free 1:1 demo now.
