For any piece of commercial property that is leased to tenants, the rent roll is a crucial document. The rent roll acts as a snapshot of rents due based on legally binding leases between the landlord and the property’s tenants.
Owners, managers, lenders, and potential buyers use the rent roll to get a handle on the value and stability of any given piece of real estate. The rent roll shows the start and end date of the obligation to pay rent, along with the amount the tenant is paying in rent.
What Is a Rent Roll?
The rent roll lists each tenant in an income-producing property, along with details such as how much rent they pay, how many square feet they occupy when the lease expires, and what rent increases are coming in the future.
Why Is it Important to Investors?
Whether the property is an office building, a shopping center, a warehouse, or an apartment complex, investors want to know who’s paying to occupy the property and how much they’re paying. It’s especially important for investors to know when leases expire. If a large number of tenants are coming to the end of their lease obligations, the property owner must decide whether to focus on renewing existing tenants or replacing existing tenants with new occupants. The rent roll also gives investors a feel for the future fortunes of the property. Are a number of tenants paying below-market rent? If so, the expiration of their leases gives the landlord an opportunity to negotiate market-rate lease agreements.
Example of a Rent Roll
A rent roll is a simple spreadsheet that lists the property’s address and then breaks out the individual units with information about the rental income expected from each office, apartment or warehouse bay. Here’s a sample heading row for a rent roll:
| Unit type
(commercial or residential) |
Residential: provide # of beds & baths
Commercial: provide business name |
Suite/ Unit number | Square footage | Least start date | Lease end date | Current monthly rent
(If vacant, enter $0) |
Rent increases | Expense paid by tenant | Remarks
Provide relevant property information (e.g. recent improvements or month-to-month leases) |
Who Uses a Rent Roll and How Do They Use It?
The rent roll is the property owner’s dashboard showing rental income generated by a piece of real estate, and it’s important to different parties for different reasons.
Buyers
A property investor is basically buying the rent roll and the monthly income that it represents. Any time a commercial property changes hands, potential buyers will scrutinize the document in search of challenges and opportunities. For buyers, a problematic rent roll might not be all bad – low lease rates or a high level of late payments might represent an opportunity to charge higher rates, or to improve collections.
Landlords and Property Managers
For ownership, the rent roll serves as a scorecard. Who’s paying on time? Who’s not? Collecting legally agreed-to rent payments is key to any owner’s ability to profitably operate an income-producing property.
Lenders
Just as buyers view the rent roll as a fundamental reflection of value, lenders look to the rent roll for signs that a borrower’s collateral is sound. Commercial real estate lenders analyze rent rolls as they validate their decision to approve or reject a mortgage.
What Information Does a Rent Roll Always Include?
A rent roll breaks down the rent per unit, and it also shows the total rental income for the overall property. This document combines rent data from each individual tenant’s lease agreement and compiles the information in a single document. If the rent roll includes accurate and pertinent information, the document serves as a quick reference point — the landlord doesn’t need to look up each tenant’s lease to find the start and end dates of leases, or each individual tenant’s monthly or quarterly payment.
Where To Find Rent Roll Data/Information?
When creating a rent roll, the leases between the owner and tenants are the most important starting point. These contracts spell out how much space the tenant occupies, how much the tenant pays, what increases might come in the future, and what the penalties are for late payments or other defaults. The owner’s financial records should reflect whether tenants are current or past-due on their rent.
Final Thoughts
The rent roll is an important part of recordkeeping for any investment property. This document helps the owner keep track of rental payments. It also allows a buyer to determine the value of a property, and it gives a lender peace of mind when approving a mortgage on the property
