I was recently involved in the sale and purchase of a rent roll. I had the rare opportunity to consult for both the buyer and purchaser. Let me say, this was the smoothest and least stressful rent roll transfer I have ever witnessed!
Now, some might say there is a conflict of interest by consulting for both the seller and the purchaser; and yes, I would agree! I definitely had my reservations about consulting and advising for both of them, but I discussed my dilemma with both parties. They both agreed that they would retain me as the consultant and adviser through the negotiation, transfer, settlement, transition, and retention period. In fact, I even conducted the inspection and overview on the sale of the rent-roll and prepared the due diligence report.
This was a tremendous lesson for all involved (including me)! The offer and settlement process took several months. The buying agency is now in the midst of the four-month retention period. The selling agency must continue to cooperate to ensure that all clients (property owners and tenants) are happy with the new managing agent. Both agencies must not become complacent or lulled into a false sense of security until they have cleared this retention period.
For all intents and purposes, the first goal of the buying agent is retention. The second goal is to build on the managements that they have invested in to encourage the investor to buy more properties and recommend their services. That’s how a business owner should focus their attention to build on their investment. Principals need to understand and monitor their ROI.
The amount invested should be at the top of your mind at all times. The managements that transferred with the rent roll should be tracked in the context of historical data. Performance should also be logged and recorded. This ensures not only that the investment was solid and worthwhile, but also that future investments in purchasing rent rolls are made with factual historical data.
It’s important to understand the impact that the previous purchase had on your business, good or bad—and that’s just the financial investment! What about the investment of time; the years the principal has invested in developing, growing, and nurturing their own brand; and their personal and professional reputations?
Too many principals purchase a rent roll without any way to track the performance and ROI of the investment. Too many principals who decide to sell their rent roll believe that once the contract has been agreed upon, their job is done. They believe it’s just a matter of transferring the files over on settlement day. Nothing could be further from the truth!
Some principals even make sure that the new managing agent employs their current team to continue managing the properties. They believe property owners will feel more secure with the management continuity and familiarity, therefore increasing their chances of retention. Once more, nothing could be further from the truth!
So, before you decide to buy or sell a rent roll, please ensure that you’re adequately informed. It’s not just a matter of signing a contract and employing a team. There is so much more than meets the eye!
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