The increasing spread of Covid-19 throughout the major markets of Sydney, Melbourne and Brisbane has triggered a considerable increase in the demand for rent rolls.

In February 2021 we started to see a higher number of enquiries from agencies wishing to purchase. This has now tripled since the beginning of the new financial year.

This demand is being fuelled by the perfect storm being experienced in both residential and commercial property markets across Australia.

A considerable number of our clients are experiencing a higher than normal churn within their rent rolls due to; 

• landlords wishing to sell and capitalize on rising property values;
• higher numbers of owners re-locating back to their properties due to Covid-19;
• higher vacancy factors within some apartment markets; and
• lower investor activity over the past 12 – 18 months.

Most have reported a decline in the number of properties under management of between 5% - 20% relative to 12 months ago. At best, some are reporting neutral growth.

Whilst most markets have experienced rental growth, some modest increases in management fees has not been enough to offset the lower numbers of properties under management.

Consequently, the demand for a quick “top up” seems to be their natural solution.

With lower levels of available rent rolls and more buyers in the marketplace, competition among agencies is fierce. We’re seeing multiple offers for portfolios (as high as twenty) and the multipliers being offered for mid tier portfolios is on the rise. Interestingly, prices for top tier portfolios have not increased – yet.

It makes logical sense to purchase a rent roll if you follow these commercial considerations:

1. Analyse the additional revenue vs the costs of buying the rent roll – don’t focus exclusively on the top line revenue.
2. The biggest overhead to factor in are additional staff.
3. If the new portfolio is showing a minimum net return of 15% compared to indicative borrowings of 2.5% - 4.5%, then it’s a great investment.
4. Undertake a thorough due diligence of the calibre of the managements and the longevity of the landlords – don’t buy low hanging fruit.
5. Avoid portfolios where more than 10% of the properties under management are owned by a single landlord or pay a lower multiplier relative to the risk profile.
6. Work in unison with the seller of the rent roll – the better the collaboration the better the outcome.
7. Make sure your conversion strategy is tight-knit – at the end of the day both parties want the same thing; as many as managements as possible to transfer.

If you’re wishing to buy, sell or value a rent roll, contact us today for a confidential conversation.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

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