On the 1 February 2024, Acumentis and GWA Valuers joined forces, uniting the business valuation expertise of Teri Roberts and Usher Abbey with our seasoned team, including Rod Davidson from Western Australia creating an experienced team in the field of rent roll valuation.
Understanding Rent Rolls
A rent roll is a group of managements that a real estate agent manages for an owner/landlord. They charge a fee mainly on the basis of a percentage of rent and earn other fees known as ancillaries.
A rent roll encapsulates the management of properties undertaken by real estate agents on behalf of landlords. It involves charging fees, primarily a percentage of rent, along with ancillary charges. The market acceptable method of valuing a rent roll entails multiplying the commission received by the real estate agent by a predetermined multiplier, refined through an analysis of comparable rent rolls and adjusted to take into account points of difference.
Factors Influencing Valuation
Adjustments are then made to calculations as deemed appropriate. These adjustments may be made to one or more of the following:
- Market rent of the properties being managed.
- The level of ancillary income being charged on the managements.
- The average commission being charged on the managements.
- Vacancy of the rent roll
- Level of arrears of the rent roll
- Key staff experience and tenure to the business.
- Documentation and files
- Sales evidence and demand in the marketplace.
Current Rent Roll Market
The Australian rent roll market is currently robust, with significant transactional activity. Below are some broad indicators across property management fees, ancillaries, and multipliers, reflecting the unique dynamics across major cities:
- Melbourne:
Property management fees (AAMI): Approximately $1200 per property.
Ancillaries: 30%.
Multipliers: $2.80 to $3.50, depending on location and income. - Sydney:
Property management fees (AAMI):
Around $1600.
Ancillaries: 20%.
Multipliers: Low $3.00, with a high-end range of $4.00 for high-fee properties. - Brisbane:
Property management fees (AAMI): Approximately $1900.
Ancillaries: Circa 15%.
Multipliers: Circa $2.80 to $3.20, based on location and income levels. - Perth:
Property management fees (AAMI):
Average of $2100 to $2200 per property.
Ancillaries: Circa 45% to 50%.
Multipliers: Range from $3.00 to the highest paid of $4.00.
Market Trends and Challenges
Consolidation: The market is witnessing a trend of consolidation, with larger firms acquiring smaller ones, allowing economies of scale and enhanced efficiency.
Rising Rents: The strong surge in rents across Australia contributes to maintaining and growing the value of rent rolls, counteracting attrition due to property sales.
Regional Markets
Regional markets present diverse dynamics influenced by factors such as rents, property turnover, and associated risks. Risks differ depending on location, mining areas are an example of areas where multipliers are far lower than a city market reflective of the perceived risk associated with mining towns. Conversely some regional lifestyle markets with solid growth in population and are popular to live can sell at similar multipliers to a metropolitan market. Valuers must be cognisant and take into consideration these local factors.
Identifying Risks
Ineffective management is a key risk to property management retention. This issue typically surfaces through a comprehensive review encompassing past and current income, and the data retrieved from Property Management rent roll programs. High arrears and vacancy rates exceeding market norms are key factors in determining a poorly managed rent roll business. A review of data and property management agreements normally highlights discrepancies. Frequent staff turnover, inexperienced team members or inadequate staffing levels can be key factors. This is often attributed to a business owner with little oversight of this part of the business.
These factors can significantly impact the multiplier applied to the rent roll.
Specialised Valuation Expertise
Valuing rent rolls demands specialised knowledge and decades of experience. The Acumentis team brings precisely that—expertise and a commitment to providing high-quality service to our clients.
The merger between Acumentis and GWA Valuers positions us well in the dynamic Australian rent roll market. With a focus on excellence and a wealth of experience, we continue to serve our clients with dedication and precision.