Why Due Diligence is Critical for Rent Roll Sellers

If you are thinking of selling a property, you are likely to make a list of improvements that can be accomplished before the home goes onto market.

Do I paint or perform some cosmetic or even more substantial renovations on the property? 

What about the gardens? How do I declutter the home and make it look sensational for Buyers? What will the photography and floor plans look like? What can I do to get the best Buyer for the property? These are some common questions asked by Sellers.

A professional Real Estate Agent will be the Seller’s advisor (sometimes well before the property is listed for sale).

In that respect, selling property is similar to selling a Rent Roll. In the world of Rent Roll Sales, a Rent Roll Broker will be the Seller’s advisor (and just like residential Real Estate, sometimes well before the Rent Roll is listed for sale).

But … How do you paint, improve, stage, photograph and manicure a Rent Roll?

The answer is .. Do your own Due Diligence well before a Buyer does.

Due Diligence is the ‘Building and Pest Inspection’ equivalent of Rent Roll Sales. A Buyer (or someone they appoint) will investigate the Rent Roll for any obvious defects that may cause them grief now or down the track. A Building and Pest Inspection on a property has the same intent.  

At Real Estate Dynamics, we assist our Sellers with how to do their own Due Diligence before we launch the Rent Roll to Market.

Here are some of the items we check with them:

APPOINTMENT AND TENANCY CHECK:

  1. Is the Management Agreement and associated documentation compliant, is it fully signed, and does it match the data in the Trust Accounting Software;
  2. If State or Territory legislation allows, can the Appointment be assigned;
  3. Does the Management fee and other fees match the Trust Accounting software data;
  4. Are the Agency set of Keys tagged and available;
  5. Is the Tenancy Agreement Complaint fully signed and matches the data in the Trust Accounting Software;
  6. Does the weekly rent and the bond amount match, and what is the bond number recorded for that tenancy and
  7. Are the condition reports – entry, exit and routine present and on file?

PROPERTY AND COMPLIANCE CHECKS

  1. Each State and Territory has varying degrees of compliance – smoke alarms, pool safety, and gas certificates, to name a few. Is there a record of compliance in place for each item for each property and
  2. Is there a company that maintains the compliance requirements, and how is compliance recorded in the Trust Accounting Package?

RENT ROLL OPERATIONAL CHECKS

  1. Key Rent Roll data such as number of properties, active Tenancies, multiple or related ownership, properties gained and lost over the past 12 months;
  2. Rent Collection and Arrears performance – How many renters are in arrears, and is there a pattern with payment days;
  3. Repairs and Maintenance – number of orders, quotes pending and outstanding;
  4. Routine Inspections – Are there any outstanding routine inspections, and why;
  5. Ending a Tenancy – Tenants due to vacate, number of bonds not finalised, any future tribunal actions and
  6. Insurance Claims – any insurance claims that are not complete

Whilst this list is not exhaustive, we hope it can guide you on what most Buyers will look for. Any Business Owner should have systems built for these regular audits and checks throughout the lifecycle of their Rent Roll asset.

If you’d like a free copy of your state-based Due Diligence Spreadsheet for Sellers (whether or not you are thinking of Selling or just completing an audit), you can do that by filling out the form below.

Our team at Real Estate Dynamics will always be delighted to help you with any questions.

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