Starting a rent roll in 2020? Read on!
Looking back, it’s been so refreshing to work alongside the property management industry over the last few years. I started my career in capital markets, servicing mostly ASX listed companies in resources, industrials, biotechs and everything in between.
I think back to how complicated some of the revenue models were in those businesses and how much capital they required just to get going. Tiny little mining companies would scour the market for millions of dollars, just to acquire the right to explore land!
Biotech was another one that blew me away. The process for testing and commercialising drugs and medical devices was totally nuts. TGA, FDA, pre-clinical trials, post clinical trials. The regulatory framework was like quick sand and many of those businesses failed because of it.
Fast forward to today and I’m loving the property management industry. As an asset, it doesn’t get any better than a rent roll. Let’s take a look.
Rent rolls are one of those great businesses, where you get more utility from your fixed costs with every extra management you bring on. In this sense, rent rolls can be quite profitable once you pass the 200 management mark.
At Managed App, we’re making it easier for sub 200 managements and startup rent rolls, too. Setting up with Managed App means fully automated payments and a user experience that connects, landlords, tenants, property managers and tradespeople. Meaning far less overhead in your business and lower barriers to entry! Did we mention we’re also a fully white labelled product? No need to sign up with a large network, you can build your own real estate brand with Managed App.
Rent rolls are excellent examples of an annuity style business. They’re predictable, cumulative and reliable in tough economic conditions, like the one we find ourselves in right now.
The combo of these elements means you’ll be able to forecast your P&L better and not worry about revenue falling off a cliff every month. Annuity businesses are also popular with investors, making rent rolls inherently more value than an upfront revenue business.
Saleable doesn’t mean just looking like a business investors want to buy, it also means having a market. Back in the dealing desk days, “no market depth” for a stock meant there were no bids and offers (buyers and sellers). The same can be said about any asset. It doesn’t matter if you have a business that turns over $100m a year, if there’s no one out there willing to buy it - sale value will remain low.
Luckily this isn’t the case for rent rolls. So much so that big financial institutions, like Macquarie Bank are willing to finance their purchase.
Other elements that give markets depth are intermediaries (brokers). In this sense the property management industry is also lucky, as there are plenty of rent roll brokers connecting buyers and sellers. A pretty rare thing for any small to medium sized businesses.
At the risk of upsetting our hard working property manager customers, I will say that property management (in a relative sense) is a simple and easy business model to understand.
As a consumer of property management services myself, I should be careful to point out that I’m not speaking to the value of the service, of which I think is high!
What I am commenting on is the ability to set up and grow a property management business. If you’re a Licensed Real Estate agent and have a sales business or access to landlords, growing the rent roll into something valuable won't take long.
So, if you’re just starting out, growing or already established, get in touch to find out how we can help you grow.