How a Rent Roll Valuation Calculator Highlights Opportunities For Your Agency
- Rent Roll Calculator
- Jan 7
- 4 min read
When it comes to maximising the potential of your real estate agency, understanding the impact of changes to your business model is crucial. Using a rent roll valuation calculator, you can test adjustments in real-time to see how they affect both monthly revenue and the overall estimated value of your rent roll roll.
This article explores how simple changes like increasing management fees, average weekly rents, or the number of properties under management can significantly enhance your agency’s performance and long-term value.
How Is Rent Roll Value Calculated?
Before diving into examples, let’s review the formula used to calculate rent roll value:
Number of properties managed x average weekly rent x average management fee (excluding GST) x 52.1429 (weeks per year) x sale multiplier
To explore this formula in more detail, check out our article on How Is Rent Roll Value Calculated?.
Note that we have used a multiplier of 3 in the examples below for simplicity - though the multiplier applicable for each agency will vary. A broker’s expertise is essential to determine the precise multiplier for the greatest accuracy.
Opportunity 1: Increasing Management Fees
Even a small increase in your agency’s management fees can have a profound impact on your rent roll valuation. For example, if an agency manages 200 properties, each with an average weekly rent of $500 and an average management fee of 7.0%, the rent roll value could look like this:
Current scenario:
Rent roll value = 200 properties x $500 x 7.0% x 52.1429 x 3 = $1,095,001
Scenario with a 0.5% fee increase:
Rent roll value = 200 properties x $500 x 7.5% x 52.1429 x 3 = $1,173,215
This modest fee adjustment increases the rent roll value by almost $80,000. Testing such scenarios with a rent roll valuation calculator allows you to assess the feasibility and potential return of increasing fees.
"But my landlords might leave if I increase my fees!"
Some agency owners worry that raising management fees could lead to landlords leaving. However, most landlords value consistent service and effective communication over minor fee increases. If your agency demonstrates consistent value and strong communication, this concern is often unfounded. Learn more about how to retain landlords during fee increases in our article How to Retain Landlords During Property Management Fee Increases.
Bonus: work out how many properties you can afford to lose!
The Rent Roll Calculator specifically calculates how many properties your agency can afford to lose if a management fee increase is applied before the rent roll value is reduced.
For example, in the above scenario, the agency could apply the 0.5% increase and afford to lose 13 properties under management without reducing their rent roll value.
Opportunity 2: Boosting Average Weekly Rents
Another effective strategy is to focus on increasing the average weekly rent of the properties you manage. Enhanced marketing efforts, a more selective approach to the properties you take on, or better communication with landlords about market trends in your local area can help achieve this.
As an example of how increase in average rents may increase your rent roll value:
Current scenario:
200 properties x $500 x 7.0% x 52.1429 x 3 = $1,095,001
Scenario with an increase to $520 per week:
200 properties x $520 x 7.0% x 52.1429 x 3 = $1,138,801
An increase of just $20 per week per property on average across the portfolio boosts the rent roll value by over $43,000.
Opportunity 3: Expanding the Number of Properties Managed
Expanding your rent roll by attracting new landlords is another path to growth. By effectively promoting your services or offering guarantees around service, communication, or other incentives, you can build your portfolio further.
Here’s an example of the impact of increasing number of properties managed on rent roll value:
Current scenario:
200 properties x $500 x 7.0% x 52.1429 x 3 = $1,095,001
Scenario with 220 properties:
220 properties x $500 x 7.0% x 52.1429 x 3 = $1,204,501
Adding just 20 properties results in an increase of $109,500 to the estimated rent roll value.
Opportunity 4: Testing Multiple Scenarios
The real power of a rent roll valuation calculator lies in its ability to combine changes and test multiple scenarios. Imagine increasing management fees, average weekly rents, and the number of properties managed simultaneously. You can instantly see the combined impact on your monthly revenue and rent roll value.
For example, if our example agency made relatively modest changes including adding 20 properties under management, increasing average rent by $20 per week, and increasing management fees by 0.5%:
Current scenario:
200 properties x $500 x 7.0% x 52.1429 x 3 = $1,095,001
Scenario with multiple changes:
220 properties x $520 x 7.5% x 52.1429 x 3 = $1,342,158
Under this scenario, estimated rent roll value would increase by more than $247,000!
In addition, Average Annual Management Income (AAMI) per property would increase from $1,825 to $2034 and Average Annual Management Fee Income would increase from $365,000 to $447,386.
What impact could a few small changes make to your rent roll value and profitability?
Why Use a Rent Roll Valuation Calculator?
Using a rent roll valuation calculator simplifies the process of evaluating your business’s financial health and potential. It enables you to:
Test adjustments quickly and confidently.
Identify the most effective changes for growth.
Communicate more effectively with landlords, brokers, or stakeholders about your agency’s value.
Final Thoughts
Understanding how small changes can significantly improve your rent roll value is a game-changer for any real estate agency. A rent roll valuation calculator not only simplifies the process but also gives you the insights needed to make informed decisions.
Whether you’re increasing fees, raising rents, or expanding your portfolio, the right tools can set your agency on the path to long-term success.
To start testing adjustments for your agency today, try the Rent Roll Calculator now.
