In four and half years of MC Rent Roll Broking I've learnt a lot along the way. But I've also seen some silly mistakes by a vendor as well as a purchaser. Each time something has happened which has created a problem for me to find a solution. And in doing so I've made sure the experience is passed on to the next vendor or purchaser, so hopefully that same mistake is not made again. So what are my Top 10 Key Learnings?
1. Funding - it's a very good idea to speak to your bank and discuss rent roll only cash flow lending. Not all banks will take just the rent roll as security. Some will also want bricks & mortar, which could mean you cannot separate your personal affairs from business.
2. Legals - a poorly drawn up contract will ruin or crash a deal. Even a solicitor that has no experience in rent roll sales. Your normal solicitor you've used for many years will probably not cut it. I've seen really good contracts presented to pruchasers and their solicitor will completely re-write the whole thing, nearly killing the whole sale.
3. Retention - so many vendors and even purchasers get caught up in a price war, not budging on 5 or 10 cents. The most important thing is the retention. If there is a low average property per owner, ie less than 1.50 properties per owner and the property manager is going across with the sale, and the vendor is assisting with the transition post-sale, then don't offer 6 - 12 months retention, it will only upset and sour the sale.
4. Checklists & Planning - everyone needs to work to a plan. Make sure once the sale has been exchanged that a program or event checklist is mapped out in collaboration with the purchaser & vendor.
5. Staff - in nearly all sales the staff should be retained from the vendor's office, especially the property management team. You cannot buy a rent roll and expect everything to be smooth if you haven't retained the staff. There is culture ingrained in the rent roll that will only come across with the staff.
6. Share Sales - they can be very successful as long as the vendor is completely transparent and purchasers have their risk completely mitigated.
7. Income Per Property - what is very key to a higher multiplier is a solid average income per property across the portfolio as well as strong letting fees and sundry fees. These rent rolls sell more easily.
8. Branding - a brand does not mean anything if the people behind it do not believe in it or market it properly. Create a following and believe in the brand you trade as.
9. Due Diligence - always conduct due diligence on a rent roll sale if you're acquiring. Alternatively, prepare your business/rent roll for sale by conducting an audit of files as well as MAAs to make sure you're confident when you go to market.
10. Meet with the Vendor before Acquiring - I see purchasers put offers forward before they've met the vendor. More often than not they low ball their offer and it only distances the vendor, before they've even met you. With both purchaser and vendor meeting and striking a relationship it begins to put price as a secondary factor in a sale and more importantly whether the two parties can get along and work together going forward.