What Is Rent Roll: Definition & Key Insights

When investing in a rental property, you are actually buying the property and the income that your property generates.

It’s often easy to value the property based on the price-per-square-footage. However, in real estate investing, it could be harder to use a property's rent roll to measure the value of your income stream. This is especially true during economic volatility and unusual market conditions.

Rent roll shows you the rental income from any real estate asset. Typically, rent roll is constructed for any real estate that produces an income, such as multifamily buildings, commercial properties, and single-family homes. Usually, commercial real estate includes shopping centers and office buildings, as well as land that’s leased for agricultural use.

Some people see rent roll as a simple-to-read document, the information on the rent roll is used in various financial performance formulas for rental property. This includes the gross rent multiplier, cap rate, internal rate of return, and net operating income.

Whether it’s a multifamily property or not, you must keep detailed financial records, and the rent roll helps you do that. So, when do you use a rent roll, and how do you read it so that you can properly determine the value of your property before buying or selling?

What Is Rent Roll

Rent roll is an itemized report of income generated from each unit in a rental property. It includes how much rent a tenant owes each month, the rent you’ve already collected, and any overdue payments a tenant may have on their account. Rent roll is crucial for various types of properties, including multifamily buildings, commercial properties, and single-family homes. A rent roll report provides a quick snapshot of tenants and portfolio income, making it essential for real estate transactions.

Why Is Rent Roll Important

Rent roll serves multiple purposes:

• Income Verification: Confirms the rental income for prospective buyers and investors. This verification is crucial for rental property investors to ensure the stability and accuracy of the rental income
• Financial Planning: Helps property owners manage cash flow and plan for expenses
• Tenant Management: Tracks tenant payment history and lease details, aiding in property management decisions

How Rent Roll Works

Rent roll can be property-specific or may be developed as the master rent roll for your entire rental property portfolio. The exact information shown when you create rent roll may vary based on the property type. However, good rent roll includes this information about the rental property:

To effectively manage your property, it is important to find rent roll data from reliable sources.

Rental Property Information

• Market or zoning area of the property (suburban, urban, mixed-use, residential)
• Type of property (multi-unit, single-family, etc.)
• Property address
• Name of the management company or property owner

House and Unit Data

• Unit number (1, 2, A, B, etc.) if that property offers multiple rental units
• Number of bedrooms
• Number of bathrooms
• Square footage
• Lot size
• Additional features (freestanding storage shed, back yard deck, two-car garage, etc.)
• Other amenities (near greenbelt, HOA, swimming pools, etc.)

Tenant Information

• Name of tenant
• Monthly income (if known)
• Monthly rent
• Rent concessions provided by landlord to tenant
• Lease start date
• Lease end date
• Complete lease term
• Security deposit that's held by the landlord
• Prepaid rent
• Past due rent
• Date the rent was paid
• Additional tenant expenses (storage fee, parking fee, pet fee, etc.)

Tenant Rental Income Summary

• Total annual rent collected (pest control, landscaping, other annual fees to charge tenant, extra rental income, etc.)
• Total monthly rent collected

Rent Roll Example

Spreadsheet software, such as Google Sheets and Microsoft Excel works well when you want to create a rent roll. Rent roll indicates when the lease began, includes the property address and any rental concessions. It also lists the square footage and property type.

We put together a rent roll template using Google Sheets that can be customized to your needs.

Sources of Rent Roll Data

There is a lot of information on your rent roll document. However, the data for the rent roll comes from only a few sources:

• Profit & Loss (P&L) for annual gross income and monthly gross income
• Lease agreement or tenant file from rental units
• Appraisal report for size and number of rooms
• MLS listings (if property was bought from your real estate agent)
• County tax assessor (zoning, lot size, property size)

Who Uses Rent Rolls

There is much more to the rent roll than you initially see. Many real estate agents focus on the balance sheet and profit and loss (P&L), but rent roll for a rental property offers a surprising amount of information on just one page.

Ultimately, rent roll is your all-purpose document, and it's used by income property managers, buyers and sellers, lenders, commercial real estate investors, and landlords. With that, some government agencies might require a rent roll, too.

Sellers and Buyers During Due Diligence Process

Rent roll is an important tool to use in evaluating the return you're making on your investment in a property. The current rent roll can tell a prospective buyer or seller whether that property has been stable in generating gross rental income. When you compare the fair market rent to what the tenant currently pays, you can see the potential for increasing the house's value by raising the rent.

If a tenant's lease is nearing renewal, extending it can increase the property's sale price by offering lease stability for another year. Buyers often pay more for properties with predictable income streams.

Landlords and Property Managers

Rent roll is invaluable to property owners and property managers for several reasons:

• Income Verification: It provides a clear record of rental income, essential for financial planning and loan applications
• Tenant Management: Tracks payment histories, lease terms, and tenant details, enabling proactive management of tenant issues
• Financial Analysis: Offers insights into cash flow, rental trends, and occupancy rates, helping in making informed investment decisions
• Maintenance Planning: Identifies periods of high turnover and vacancy, allowing for better scheduling of maintenance and repairs
• Lease Management: Helps monitor lease renewal dates, ensuring timely negotiations and reducing vacancy periods
• Compliance and Reporting: Assists in meeting regulatory requirements and preparing accurate financial reports for stakeholders

Real Estate Investors for Analyzing Potential Deals

Residential and commercial real estate investors use rent roll to evaluate potential rental properties, verify current rental income, and anticipate future cash flow issues.

Comparing rent roll to the income line on a profit and loss statement quickly reveals if the gross income is accurately reflected. A comparative market analysis (CMA) can further indicate whether tenants are paying fair market rent or if there is potential for rent increases.

Rent roll also helps investors identify potential cash flow problems. Late rent payments or upcoming lease renewals are red flags that could signal reduced cash flow if evictions or vacancies occur. Temporary income stops and increased vacancies can significantly impact profitability.

Rental properties listed on various marketplaces often include rent roll information, allowing investors to review lease start and end dates, security deposit amounts, rent payment statuses, and more, providing a comprehensive overview of the property's financial health.

Mortgage Lenders and Brokers

Lenders, banks, and mortgage brokers use rent roll to evaluate the risk of approving a loan, opening a HELOC, or making a cash-out refinance. They review rent roll to determine the property's future income generation potential.

For example, a high historical turnover rate and increasing vacancy rates can indicate issues with the rental property's condition, the property management company, or tenant screening procedures. This information helps lenders assess the property's financial stability and risk.

Analyzing a Rent Roll Report

To effectively use a rent roll:

• Compare Historical Data: Analyze annual and monthly rent rolls to identify trends and growth.
• Evaluate Tenant Turnover: High turnover rates can indicate issues with property management or tenant satisfaction.
• Monitor Rent Growth: Compare rent increases to market averages to ensure competitive pricing.

For a detailed guide on conducting a thorough rent roll analysis, check out our comprehensive article on Rent Roll Analysis.

Ways to Use Rent Roll

Analyzing and forecasting rental property performance using a rent roll involves examining various key metrics and data points. Here are several ways to measure and forecast potential outcomes on the performance of a rental property using a rent roll:

Occupancy Rates

• Current Occupancy: Calculate the current occupancy rate to understand the current rental income versus the potential maximum income.
• Historical Occupancy Trends: Examine past occupancy rates to identify trends and forecast future occupancy.

Rental Income Analysis

• Monthly Rental Income: Summarize the total rental income collected each month to track financial health.
• Rent Increases: Analyze the history of rent increases to predict future income growth.
• Late Payments: Monitor the frequency of late payments to identify potential cash flow issues.

Lease Expirations

• Lease Expiration Schedule: Review the schedule of lease expirations to predict potential vacancies and plan for tenant retention or new leasing efforts.
• Renewal Rates: Measure the rate at which leases are renewed to assess tenant satisfaction and stability.

Tenant Turnover

• Turnover Rate: Calculate the turnover rate to understand how often tenants leave and the impact on occupancy and rental income.
• Vacancy Duration: Track the average duration of vacancies to improve marketing and tenant acquisition strategies.

Rent Concessions and Discounts

• Concession Analysis: Review any rent concessions or discounts given to tenants to understand their impact on overall revenue.
• Incentive Effectiveness: Evaluate the effectiveness of incentives in attracting and retaining tenants.

Market Comparisons

• Market Rent Comparison: Compare current rents with market rates to determine if the property is competitively priced.
• Competitor Analysis: Analyze competitor properties to identify strengths and weaknesses in your rental strategy.

Maintenance and Repair Costs

• Cost Tracking: Track maintenance and repair costs associated with each unit to understand the financial impact and plan for future expenses.
• Preventive Maintenance: Implement preventive maintenance strategies to reduce unexpected costs and improve tenant satisfaction.

Financial Metrics

• Gross Potential Rent (GPR): Calculate the total potential income if all units were occupied at market rent.
• Net Operating Income (NOI): Measure NOI by subtracting operating expenses from gross rental income to assess profitability.
• Cap Rate: Determine the capitalization rate to evaluate the return on investment of the property.

Forecasting Tools

• Historical Data Analysis: Use historical rent roll data to identify trends and create financial projections.
• Scenario Analysis: Develop different scenarios (e.g., varying occupancy rates, rent increases) to forecast future performance under different conditions.

Collection Rates

• Collection Efficiency: Monitor the rate at which rent is collected versus billed to identify potential issues with payment collection.
• Delinquency Rates: Track delinquency rates to manage and mitigate risks associated with non-paying tenants.

What Is Rent Roll in Banking

In banking, rent roll is used to verify the rental income of a property for loan qualification purposes. It helps lenders assess the property's ability to generate consistent income and support loan repayments.

What Is the Difference Between Rent Roll and Rent Ledger

Rent roll provides a snapshot of rental income and tenant details, while rent ledger is a record of all financial transactions related to rental payments over time. The rent ledger includes payment dates, amounts, and any late fees, providing a detailed financial history.

Rent Roll & Property Management Software

A well-maintained rent roll is a vital tool for any real estate investor or property manager. It provides comprehensive insights into rental income, tenant behavior, and property performance. By regularly updating and analyzing rent roll, you make informed decisions to maximize profitability.

However, managing rent roll manually is time-consuming and prone to errors. This is where DoorLoop's property management software makes a difference. DoorLoop automates the process of creating and maintaining rent rolls, ensuring accuracy and saving you valuable time.

With features designed to streamline tenant management, financial tracking, and lease administration, integrating DoorLoop into your property management practices, ensures your rent roll is always up-to-date, accurate, and easily accessible. This simplifies your workflow and provides powerful tools to analyze and optimize your rental property portfolio. Schedule a free demo.