The Significance of a Rent Roll in Multifamily Real Estate Investing

Your job in analyzing a rent roll is to determine where rents actually are and where you can take them in comparison to comps.

When looking at a rent roll, what you want to do is determine current rents. This will let you know what you can charge on new leases. It will also show you examples of where rents are trending in comparison to past months.

To do a deep breakdown of a deal, you really need to categorize them into floor plans and then into unit conditions that are classic, partial upgrades, and full upgrades. This way you know what you're buying and how many units you can renovate yourself.

First you look at all the units with the same floor plans based on SQFT and number of bedrooms and bathrooms. Say you find 3 different floor plans. Break these into a separate category.

Next is finding the condition of the units. Rarely will this be given to you straight up. You'll almost always have to analyze the rent roll to get it. It's tedious, but think of it as a separator in that many investors won't go this in depth on all the deals they look at. When you can get the most accurate picture of the deal, you can then see opportunities where others may not see them.

In the rent roll, there will usually be a column that says something like classic, rehabbed, renovated, flooring, fireplace, cabinets, etc. You break the 3 different floor plans into these sub-categories. You compare rents of these and group them together. This is not going to be an exact science because often they're mislabeled or out of date. Still it will give you a better idea of what condition the overall units than if you didn't do this step.

Now that you have your floor plans, and then sub-categories of unit condition. You can transfer this into a property analyzer. Make sure you have a property analyzer with a lot of rows for unit mix. I would say that most of them don't have it because actually doing this process can take a couple hours sometimes if the deal is big with a lot of units. Most syndicators skip this step and only separate them into floor plans. You however, might have 10-20 rows filled out.

What this will do is give you a much much clearer picture of what you can actually do to the property. It takes so much guess work out of it and eliminates the margin of error most syndicators accept.

Notes about the rent roll:

There is usually a column that has what market rents are. Do not take this at face value, even if the numbers are coming from a property manager. You should get another opinion on the market rent, along with doing your own detailed research on comps. Even property managers rarely will go to the extent of calling surrounding properties personally and posing as a tenant to get the most accurate information. If you only get your rent comparables from online sources, what you'll find is that many of the floor plans are fully occupied and not shown.

A useful tool to check the new leases in the last 6 months on the rent roll, then go onto the online listing of the property and see what advertised rents are.

Always check occupancy on the rent roll. Is this accurate to what is advertised? How does this occupancy compare to other comps in the area? Occupancy numbers can tell you a lot. If it's low in comparison to comps, is it a marketing issue, maintenance issue, tenant issue, location issue, crime issue, etc.

Use every piece of data to understand the property to a deeper degree. It really does tell a story.