Just like our childhood fairy tales, our story starts with a “once upon a time” scenario. It was back when the property management department was viewed as the poor cousin of real estate, where all that mattered was the tolling of the bell, announcing to all staff that another sale had been secured.
But, with time and education, combined with stability and consistent income it’s never been more apparent that real estate agencies thrive when there is a growing rent roll attached to the business. Let’s take a look at the pros and cons of buying a rent roll, versus growing one from scratch.
Why Should My Real Estate Business Buy a Rent Roll?
Cash, as we all know, is king in any business. And every business lives and dies by a healthy and reliable cashflow. Industry experts all agree, there’s no smarter way to ensure your agency’s success than with an efficient rent roll which generates consistent profits. Ultimately, this will help your business become bulletproof in any market.
You’re time poor
You might have big plans, but a small window of time to make them happen. Rent roll acquisition can speed up the process and remove the need to have to build an organic brand and database, both of which take time.
You seek speedy expansion
If decisive decision making is your strong point, this could be the perfect reason for why purchasing, over growing, a rent roll, will work in your favour. Not only will you be saying “hello, instant cashflow” but you’re giving the whole agency the gift of business stability.
Any significant investment is not going to come cheaply. Rent roll acquisition is a costly exercise and requires capital. You’ll need to be financially prepared to make this massive outlay, with banks assessing your capacity and collateral.
Agencies must also invest in solid infrastructure when buying a rent roll. There’s funding for new staff, and all that goes along with this business expense. And if you don’t budget for this, it could come at a great cost to your business. Tip: why not consider sourcing new staff from the company selling its rent roll?
Buying a rent roll essentially means welcoming a whole host of new clients into your business that you have never met. Not only have you inherited their properties, but you’ve assumed responsibility for their specific demands. There is also a real chance clients could be put out by the change, so be prepared to spend a great deal of time reassuring your new landlords you still have their best interests at heart.
Why Should my Business Organically Grow a Rent Roll?
You possess the right business skills
It takes an incredible amount of focus and attention to successfully build a rent roll. If you’re skilled at putting processes, structures and systems in place, and there’s no urgency to add staff (and potentially hire the wrong people), this slow, organic growth can work in your long term favour.
You have a strong brand and database in place.
If you’re a business with a strong brand and profile or social media presence, you can draw on this to assist with steady rent roll growth. You can also leverage your network and enjoy the benefits of this manageable method of attracting new clients to your rent roll.
Time is on your side
If time isn’t of the essence, growing a rent roll one door at a time can take a huge financial pressure off a business.
Cashflow could be compromised
Slow growth might cost you less, but you’re also capping your ability to earn the big bucks. In a tough market, rent rolls represent a stable source of income ( as long as they are managed correctly).
You need patience and persistence
Organic growth requires patience and persistence, without the guarantee of a big pay day. You need to play the long game here and keep on track with your vision, even during the tough time.
You need everyone on board
Let’s be honest, growing a successful rent roll is not a one person job. If the business culture isn’t conducive to the organic growth of a rent roll, and staff don’t adhere to processes, standards and systems, it might falter before it even begins.
The upshot of these snapshots of the pros and cons of acquisition versus rent roll growth is there is no definitive, correct response. The ultimate goal is to finesse the best of both options into your business. For more information on how The Rent Roll People can help you seek clarity on your situation, contact us for an obligation free chat on 0418 712 734 today.