I get asked this question a lot: “What’s the best way to build my rent roll?” I always reply, “What are your business’ goals for growth?”
There are two viable methods for building your rent roll: Organic growth and acquisition. But the truth is, choosing a method requires you to consider which best aligns with your business’ growth strategy and can successfully achieve your goals. There’s a catch: Whatever method you choose must be strategically planned, implemented, and managed in order for it to effectively build your rent roll and achieve your goals.
Growing Your Rent Roll Organically
Consider organic growth. This method builds your rent roll through inquiries generated from planned marketing activities. In order to strategically plan, implement, and manage this method, you must understand your market area. Understanding your market area means knowing its statistics, such as the potential number of properties that make up the market area. Knowing such statistics gives you the ability to plan the number of properties that can be gained, average weekly rent of these properties, and projected growth horizon. This method also requires a team that can effectively manage gained properties and retain business.
What are the advantages and disadvantages of organic growth? Does it align with your business’ growth strategy and goals?
The Pros of Organic Growth:
- More cost effective than acquisition
- You charge fees in accordance with your own fee schedule
- You accept managements and property owners that match your criteria
- You don’t end up with managements that another agency has poorly managed
- Property owners are nurtured and managed by your agency’s policies and processes
- Managed growth, therefore managed retention
The Cons of Organic Growth:
- Takes longer to build your rent roll
- Requires more patience, planning, and marketing investment
- Requires outlay for resources and team members prior to income converting to profits
Growing Your Rent Roll Through Acquisition
Now consider acquisition. This method builds your rent roll as you purchase other agencies’ rent rolls. Many principals use this method if their rent roll is experiencing slow growth. But, just like organic growth, acquisition requires investment, being the agreed amount for the value of the business on offer. You build your rent roll through acquisition by dealing with a broker who lists rent rolls for sale.
Once again, you must consider whether acquisition aligns with your business’ growth strategy and goals by weighing up its pros and cons.
The Pros of Growth Through Acquisition:
- Builds cash flow quickly
- Potential to increase income and asset value by increasing properties’ rental rates
- Potential to increase income and asset value by increasing and/or introducing further fees
- Further builds brand awareness and agency profile in market area
The Cons of Growth Through Acquisition:
- Fees can be low and inconsistent
- Extra charges can be low, non-existent, or inconsistent
- Property owners can be loyal to the previous agency and/or property manager
- Properties could be poor quality, placing extra pressure on your team
- Managements could be properties you would otherwise never choose to manage
- A poor rent roll purchase could damage your agency’s brand and reputation
- It takes a long time to gain a return on the investment
Which Growth Method Should You Use?
As you can see, neither method—organic growth or acquisition—is perfect, but what’s also clear is that either method can effectively build your rent roll. The key is to consider which method best aligns with your current growth strategy and goals then strategically plan, implement, and manage your chosen method to successfully build your rent roll. Keep in mind, the solution may in fact be to use a combination of both methods. It just depends on your business’ current situation, what you want to achieve, and when you want to achieve it—that should lead you to the how.
How are you building your rent rolls? Please share your experiences in the comments below.
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