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Traps in selling your rent roll

November 2016

As an agent you would be conversant with all the pros’ and cons’ of a vendor trying to sell their property privately, and have all the reasons at hand to persuade them that it is so much more beneficial to employ your services as an independent and impartial representative to look after their interests.

Therefore, I find it intriguing that when real estate agents decide to sell their business or their rent roll they often choose not to use the services of a specialist agency and Rent Roll Broker.

Selling a business and/or a rent roll is a complex process not just a transaction. It takes longer and is a more involved transaction than the average real estate sale. As real estate agents will tell their clients, in order to deal with multiple potential buyers, negotiate price, terms and conditions to the mutual satisfaction of the seller and buyer, keep a transaction together and ultimately achieve the best possible outcome, it is wise to involve the services of a specialist. Common horror stories abound about rent roll transactions going wrong, when the transaction did not use a Rent Roll Broker.

One of the key problem areas is that of privacy. For example, how does an agent get interest in their rent roll and have interested buyers sign a confidentiality agreement without first discussing the possibility of selling their rent roll with them? It is impossible. So as soon as you indicate your interest in selling to a competitor, the news is going to spread very quickly, and this information can be used against you at the next presentation for a sale or rental listing.If you are trying to ensure staff do not know about your plans till you have a sale confirmed, it is also very difficult as a private seller.

You then have to decide how much information you are going to give the potential buyer, and when you should let them carry out due diligence. Having them going through your files and finding out information about how you run your business without the correct processes and timing being adhered to can spell disaster.

Many agents think appraising a rent roll is as simple as putting a multiplier on the annual management fees. However, there are many areas which affect the multiplier and the potential buyer’s opinion of value. Things such as the evidence of recent sales, supply and demand, competition, state of the local market, the average management fee percentage and the average annual management income per management. Also of course the revenue generated by letting, other service fees and charges, the number and percentage of owners with multiple properties, the overall condition of the rent roll and how well it is actually managed, plus many other factors all affect the value. A professional Rent Roll Broker understands these factors and can address them accordingly.

Skilled Rent Roll Brokers are adept in negotiating price, multipliers, retention periods and percentages, conditions regarding due diligence, restraint conditions and periods, transferring staff, leases on premises together with liaising with conveyancers, solicitors, financiers, accountants and franchisors. Providing comprehensive procedures and advice from the beginning of the transaction through to the end of the retention period, are also a part of what a professional specialist broker can bring to the table to keep a transaction together.

With the time, money, stress and risk involved, it begs the question: why do agents fail to use a specialist Rent Roll Broker when they are engaging in such an important and complex transaction? Often it is because either the seller or the buyer approach each other directly. Sometimes it seems, because an agent runs a real estate business and sells real estate, they feel they are qualified to sell their own business, albeit they may only do this once or twice in their lifetime.

Most importantly, a Rent Roll Broker is employed by the Vendor to get the best price and conditions for their client, and can negotiate with the buyer in neutral conditions without having any personal connection in the business. This gives the Broker more negotiating power.

The reality is, while a business owner is spending their time trying to deal with complexities of selling their business they are not as focused on retaining or building the business they have. New managements secured during the sales process result in more managements being able to be sold. Lost listings and sales result in lost revenue. Lost managements not only reduce revenue but also reduce the net sales result.

So, speaking with a specialist Rent Roll Broker is comparable to a potential vendor speaking with a real estate agent. Their advice is free, unless the potential client chooses to engage the agent and a settlement is achieved as a result. Therefore it only makes sense that before you sell or buy a business and/or rent roll you should speak with us to evaluate the benefits of our service. Doesn’t it?

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