With the current high demand for Rent Roll acquisitions, it is common for a Rent Roll Business owner to be approached by a competitor or several competitors to see if they will sell. In fact, it’s more common than not, and if you’re reading this blog, I’d be surprised if this hasn’t happened to you.
But beware of the ‘Private Buyer Trap’. In our experience at Real Estate Dynamics, the Private Rent Roll transaction will go one of two ways:
- Remarkably well or
- Horribly wrong.
There is very little in between these two extremes, and in our experience, it’s the latter that is more common. In our opinion, you are taking a ‘BIG gamble’ with your goodwill by being tempted by a private Rent Roll sale.
Here are four key points Australia’s largest Rent Roll Brokerage Team points out to a Rent Roll Seller who might be tempted by the ‘Private Buyer Trap’:
- Buyers: A competent Rent Roll Broker will have all the potential Buyers in their database. Finding a Buyer is the easy part. Finding the right ‘qualified’ Buyer requires a skilled professional. Think about your marketplace – who would you sell to, and who would you not sell to? In most cases, a Rent Roll Broker will have a choice of qualified Buyers for you and not limit you to one or two Buyers. This creates healthy price competition, but it also gives Seller’s peace of mind in choosing the right Buyer for their Rent Roll or Agency.
- Confidentiality: The Real Estate Industry loves ‘gossip’, particularly when it comes to their competitors. A professional Rent Roll Broker will have brilliant systems around confidentiality that ensure your business is kept in the ‘vault’ until the Broker and the Seller agree that it’s time for the tight confidentiality agreement to be advanced.
You do not want ‘everyone in town’ to know you are for sale. A professional Rent Roll Broker will only take your Rent Roll out of the ‘vault’ when it’s time, and then they will get it sold quickly, minimising the risk of unnecessary exposure.
If you’re thinking of using a Broker, we would suggest you ‘secret shop’ them as a Buyer and see what information is revealed to you. If too much information is disclosed, do not use that Broker. Rigid confidentiality systems could save you tens of thousands to hundreds of thousands of dollars in your goodwill.
- Emotional Versus Commercial Decision Framework: In most cases, the Seller will have emotions tied to the sale of their Rent Roll or Agency. And so they should! They have worked hard for many years or in some cases, many decades, to build a great Asset. Unlike selling houses, where the Buyer can be emotional about ‘falling in love’ with the home, Rent Roll Buyers are only interested in making a commercial decision based on numbers and data. This emotional versus commercial framework can deteriorate so quickly without the guidance of a professional. Nearly all ‘attempted’ Private Sales that end up turning to Real Estate Dynamics for help do so because of this reason.
- Proven Processes and Success History: Before a Rent Roll goes to market, our team ensure 46 priority tasks are completed. These tasks ensure that there will be a smooth sale. If these tasks are not completed, it could cost the Seller a huge amount of goodwill. Many of these tasks relate to preparing the Rent Roll for sale. Without preparation, a Seller may be left with many, many discomfort points which a Buyer will challenge.
A competent Broker will also supply you with a proven Contract of Sale for a goodwill or asset sale that maximises the protection of the Seller and removes any obvious discomfort for a Buyer. Without a contract of sale that has a proven record, in many areas, the sale can be ‘grey’ or even ‘silent’ leaving Sellers and Buyers and even their lawyers in a quandary.
At Real Estate Dynamics, all of our Sellers are provided with a comprehensive, tried, and tested Contract of Sale prepared by our commercial lawyers. Our Sellers are also provided with a recommended list of lawyers who have worked with our Seller for many years. These lawyers are specialists. They know the process. They know the contract, and they know the obstacles. To have such an instrument prepared by a lawyer could cost you between $7,000 and $12,000 (sometimes even more). To have a lawyer who isn’t familiar with a Rent Roll transaction … well, keep adding to that bill!
A competent Rent Roll and Agency Broker will be able to prove to a Seller their worth. They will be able to explain their processes, and systems (systems that begin before the launch of the Rent Roll and finish after the retention period has been completed). They will also provide you with a list of past Sellers to call.
Without frameworks, processes, or proven collateral that makes the process simple and easy (from start to finish), a Private Seller could easily destroy their Rent Roll Asset. Sadly, at Real Estate Dynamics, we have seen this happen far too often, with Sellers falling into the ‘Private Buyer Trap’.
If you would like a confidential discussion with any of our team, about anything Rent Roll or Agency related, complete the form below and we’d be delighted to speak with you.