Rent roll
A rent roll is the unit-by-unit or tenant-by-tenant schedule of who occupies a property, what they pay, and when their lease ends. It is the primary evidence behind every revenue assumption in an underwriting model.
How it works
A multifamily rent roll lists unit number, floor plan, square footage, occupancy status, contract rent, any concession or discount, move-in date, lease expiration and often the balance owed. A commercial rent roll lists tenant, suite, area, base rent, escalation schedule, recovery structure, commencement and expiration, options and any free rent remaining. In both cases the file is a snapshot on one date, which is what makes it evidence rather than a projection.
Read it for the four things a summary page cannot show you. The unit mix and its rent spread tells you whether an average rent is representative or is being pulled by a handful of units. The expiration schedule tells you how much of the loss to lease is actually reachable in the next twelve months and whether a dangerous share of the income rolls in one quarter. The concession column tells you what it currently costs to fill a unit. The balance column tells you whether a tenant is paying at all.
The rent roll and the trailing statement should reconcile, and when they do not, the difference is the finding. Annualise the current rent roll and compare it to the trailing twelve months of collected rent. A rent roll materially above trailing collections means either rents were pushed very recently or the roll includes units that are not paying.
Worked example
Illustrative. Current rent roll annualised against the last twelve months of collected rent.
| Occupied units x contract rent x 12 | $4,528,000 |
|---|---|
| Trailing twelve months rent collected | $4,281,000 |
| Difference5.8% | $247,000 |
| Explained by rents raised in the last six months | $168,000 |
| Explained by concessions not shown on the roll | $41,000 |
| Unexplained | $38,000 |
Most of the gap has a legitimate cause. The residual is what to ask about, and on this property it turned out to be four units carried as occupied that were more than sixty days delinquent.
Conventions worth knowing
- Ask for the rent roll as of the same date as the trailing statement. Two different dates make the reconciliation meaningless.
- A native spreadsheet export is worth asking for. A rent roll delivered as a flattened image is harder to check, and the checking is the point.
The common mistake
Averaging the rent roll instead of reading it
Collapsing the file to a single average rent throws away every piece of information it contains. A $1,845 average can be 220 units at $1,845 or it can be 140 renovated units at $2,030 and 80 unrenovated units at $1,521, which is a completely different deal with a completely different renovation budget and a completely different achievable rent. Build the unit mix first, then the expiration schedule, then the average. The average is an output of the analysis, not an input to it.
Related terms
- Gross potential rentGross potential rent is the rent a property would collect if every unit were occupied for all twelve months at full rent, with no vacancy, no concessions and no delinquency. It is the top line of the pro forma, and everything below it is a deduction.
- Loss to leaseLoss to lease is the difference between what a unit could rent for at today's market rate and what the sitting tenant is contractually paying. It appears as a deduction from gross potential rent when the pro forma is stated at market rent.
- T-12A T-12 is a trailing twelve month operating statement: every income and expense line a property actually produced over the last twelve months, normally shown as twelve monthly columns with an annual total. It reports what happened, as opposed to what a seller projects.
- Lease rolloverLease rollover is what happens when a lease expires: the tenant renews, or leaves and the space sits empty until a new tenant is found and fitted out. Modelling it means applying a renewal probability, downtime, leasing capital and a new market rent to every expiring lease.
- Economic versus physical occupancyPhysical occupancy is the share of units that are occupied. Economic occupancy is the share of potential rent that is actually collected. The gap between them is everything that stops an occupied unit from paying full rent: loss to lease, concessions, bad debt, employee units and down units.
- Weighted average lease termWeighted average lease term is the average remaining term across a property's leases, weighted by either rent or leasable area. It is the standard single-number summary of how long a commercial property's income is contracted for.
Keep reading
Every figure, traced to its source
Altyst computes these in exact decimal arithmetic, not with a language model, and clicking any number shows the formula behind it.