Rent Roll Guide: How Does a Rent Roll Work?

A rent roll is a commercial real estate document that consolidates the amount of rental income a property owner has coming in from multiple properties or multiple units for the same property. Landlords, property investors, and property managers use rent rolls to keep track of incoming rent, tenant information, rental unit turnover, and market prices. Real estate investors utilize rent rolls for a number of investment properties, including commercial real estate (like leased agricultural land or multifamily apartment buildings) and multiple single-family homes owned by the same investor.

Rent rolls help property owners and investors track the influx of rental income coming from their rental property or properties. Property management companies and potential investors can use rent rolls to assess the financial stability of a given property. Rent rolls can also help property owners evaluate the financial performance of a rental property when calculating net operating income (NOI), internal rate of return (IRR), and gross rent multiplier (GRM).

Additionally, rent rolls allow owners to compare their own rental unit rates to market rates, allowing them to make a call about whether or not they want to raise their rental rates to remain competitive. Rent rolls also track tenant turnover and on-time payments, giving owners and managers the ability to suss out tenant reliability and longevity. This type of information is important to help potential buyers evaluate whether or not a commercial property is a worthwhile investment.

Different types of rent rolls contain different information depending on the property type. Many property managers draft a simple rent roll document using a spreadsheet or a rent roll template from the internet that contains information that is relevant to them. However, there are a few things that a comprehensive rent roll should contain.

1. 1. Property information: Property information includes the fundamentals about a property, such as the property owner’s details, the property type, the property address, and zoning information. This often appears at the top of a rent roll as a headline.
2. 2. Unit information: Rent rolls for multi-tenant properties may contain details about each individual rental unit, including the unit number, unit type, the square footage, number of bedrooms and bathrooms, and other amenities.
3. 3. Tenant information: Tenant information includes the current tenant names, lease start date and end date, the monthly rent amount, rent due date, total rent paid, rent overdue, and security deposit information. These figures help landlords evaluate the reliability of their tenants, tenant turnover, and monthly income that the property is generating. It can also help them suss out whether it would be wise for them to institute any rent increases.
4. 4. Summary of rental income: The end of a rent roll report contains a summary of the property’s gross rental income, typically reflecting the amount the property earned in rent over the course of a year.

A number of different real estate professionals will find rent rolls useful. Here is an overview of the people in the real estate industry who may need to use a rent roll.

1. 1. Commercial property buyers: Individuals who want to buy an income-generating rental property should do their due diligence by examining a current property owner’s rent roll to confirm that the property brings in stable rent payments. The buyer can also compare rental rates with current market rates to see whether they are able to fairly raise the rent.
2. 2. Property managers: A landlord or management company may use the rent roll to check for vacancies in particular units. They can also use the rent roll to determine which tenants are paying their rent in a timely manner and which are delinquent on any payments.
3. 3. Investors: Potential real estate investors can look at the rent roll to compare the actual gross income generated by the property with the income listed on the profit and loss statement. This can help them figure out whether or not the property in question is a wise investment.

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