Current rent roll valuations
by Colin on 02/07/10 at 7:15 am
There seems to be a growing requirement for rent rolls in the Melbourne real estate market. Many rent rolls are being enquirer about by brokers and associates of my clients.
So what is the current range of multiples, what is the retention requirement and what are the factors that effect rent roll values.
What are the factors that effect rent roll values?
In no particular order these things effect the market value of your rent roll:
- the quality of the management.
- the locality of the rent roll. The closer to the CBD the better.
- the current management fees.
- whether the agent or agency is going to continue to operate post the sale.
- the number of multiple landlords on the rent roll. Rent rolls with owners who have a number of properties increases the risk of losses as a numbers of properties could be lost by the decision of one person..
- the timing of the last rent reviews.
The current retention period appears to be 3 months and 10% of the sale price. That would give me comfort that I should be able to retain the majority of properties if I was buying.
So what are the current multiples?
The range is 2.75 to 3.5 times the annual management fees received. I have personally been involved in 2 very recent transactions – one at 2.85 times and one at 3.5.
The differences in each were immense. In my opinion we got to 2.85 very cheaply and sold the 3.5 over the odds. And this is the point I suppose. The value is really only whatever the purchaser is willing to pay. You can pay me or whoever whatever you like to value the rent roll but if there is no deal then the is no deal.
So as I discuss with all of my clients that are looking to sell something do as much as you can to minimise the opportunities to reduce the value. So work on each of the factors listed above and change the ones that you can effect and ignore what you can’t and you will achieve a great result – assuming there is a buyer!
