A Rent Roll Due Diligence has 4 great uses which most business owners are unaware of.
This week we will focus on use number 3.
Buying a Rent Roll
The main use of a rent roll due diligence which every business owner understands is when they are buying a rent roll. A rent roll due diligence will form part of the contract of sale special conditions.
During the special condition period, normally between 14 to 21 days from date of contract, the buyer is to conduct a rent roll due diligence on the rent roll being purchased. If the buyer is satisfied, the contract continues and if they are not, the buyer will have the option to either re-negotiate the contract multiplier or terminate the contract of sale.
A Seller who has prepared the rent roll for sale will be able to minimise the above however, generally the rent roll has not been prepared for sale and the buyer will use this time to determine the risk associated with purchasing the rent roll.
Most Buyers are making the same mistakes within their rent roll as the Seller so undertaking a rent roll due diligence means that they do not find many discrepancies. In addition, Buyers will only look at a small number of files and not the whole portfolio therefore, not being informed to the condition of the whole portfolios.
We understand that buyers are generally time poor, running their own business, managing staff and undertaking their required duties to maintain the financial flow of their business. Therefore, the Rent Roll Due Diligence is generally handed and added to the workload of the most senior property management staff.
I have completed over 1,400 reports in my career and each report has recorded discrepancies in paperwork management or completion/software input.
I apologies for being so forward…under these circumstances relying on persons of the business to complete rent roll due diligence is undertaking this important task with the same persons making the mistakes in the business.
At the time of settlement, I have witnessed purchases where the Buyer is overwhelmed by the amount of additional work required to bring the rent roll up to date which they did not know about prior to purchasing the rent roll so that the properties are managed in accordance with the relevant real estate acts and the lack of information which was not provided at settlement.
The Opulence Consultancy rent roll due diligence has been designed to assist business owners prepare for sale, operate efficient and affluent businesses, find foundational flaws and assist in the buying process. Best practice, a deep level of understanding as to the value of a rent roll, operating and owning a real estate business and buying and selling of rent rolls are used to provide a thorough and informative report which highlights all discrepancies within the rent roll portfolio.
Opulence Consultancy is dedicated to assisting real estate industry business owners in operating and running affluent and efficient businesses.