Organize Your Rental Finances with a Rent Roll

Life moves fast as a landlord, so it’s not always easy to stay organized. You likely deal with a lot of numbers, transactions, and bookkeeping tasks every day. It can be difficult to keep a detailed record of where all your rental income is coming from. But once you’re making money through your real estate business, you must keep close track of these details for tax and legal reasons. What you may need, as a matter of fact, is a rent roll.

What is a Rent Roll?

Let’s start with a digestible rent roll definition before we dive in further. A rent roll document is a financial report that keeps track of your gross rental income, as well as several details surrounding your rental income. It’s typically a spreadsheet that includes information on each unit that you own, the amount of rent owed by its tenants, and much more.

There are many ways of going about creating one, but you generally want to create something that will be easy to glean information from quickly. Keep track of the information that you want to track, but don’t overcomplicate it, as this will only make it more difficult to analyze. You can customize it to include any details that you’d like to track or build yours based on a rent roll template online.

Components of a Rent Roll

A typical rent roll template can include the following for each currently occupied rental unit:

• Unit number
• Tenant name
• Square footage
• Lease term dates (start and end)
• Security deposit information
• Rent amount
• Rent due dates
• Rent payment dates
• Fees
• Maintenance/repairs

As mentioned, rent rolls are very customizable financial tools, which is what makes them so valuable. Beginning to track another element can be as easy as adding another column to your spreadsheet. But keeping the basics included is important—at their core, rent rolls are made so that you can have a document that serves as a quick snapshot of your rental income.

What Can a Rent Roll Tell You?

As a property owner or property management company, detailed and clean rent rolls can give insight into your business’s income health. They can essentially help you to identify any patterns in your rental income. If you notice a dip in rental income one month, a rent roll can be the key to discovering why that may be.

For example, if your rent roll shows that one of your tenants habitually pays late and that you haven’t presented any fines yet, then it may be a good idea to get on top of late fee enforcement to ensure rent gets paid on time. Additionally, your rent roll should show each lease’s start and end dates. If you notice that a few lease terms are almost up, you’ll want to contact your tenants early so that you can confirm whether or not they’d like to renew. That way, you can stay ahead of the curve and plan for your future income accordingly.

Benefits of Using a Rent Roll

With a rent roll, you reap what you sow. Here are some of the top benefits of utilizing one for your rental business.

Monitoring Profitability

With a rent roll, you have easy access to your net operating income (NOI) which is a useful way to gauge your financial situation. Your NOI adds your earned income for each rental or commercial property and subtracts it from your operating expenses, in essence showing your rental business’s profitability. Calculating NOI also helps to ensure that each individual unit is profitable. You can quickly check the financial details of each unit (rent paid, maintenance costs, utilities, etc.) and make adjustments accordingly. If you’re just barely breaking even on a certain unit, a rent roll will show you this—and it may be able to tell you why as well.

Tenant Turnover

As mentioned, rent rolls contain lease term dates, which is important to keep track of. These lease dates tell you exactly how long you can guarantee income from each unit. With a rent roll, you can check at a glance when each of your units’ leases are scheduled to end, and then do something about it. It’s up to you to keep the money flowing by habitually reaching out to your tenants so that you can be informed of their plans for each lease term. Do this far enough in advance that you can seek out new tenants and begin the screening process.

Planning Ahead

If you’re looking to expand your rental business, then you’ll need to ensure your business looks as successful and profitable on paper as it really is. Detailed rent rolls are an easy way to showcase exactly this. With the information provided pertaining directly to your income sources, potential lenders or partners can easily predict what they’re interested in: the future. They may use your rent roll to analyze trends such as your NOI, the payment history of your tenants, vacancy rates, and more when considering collaborating with you. Having this information readily available and organized will prove to potential lenders and partners that your profitable rental business is a promising and professional one.

How to Create a Rent Roll for Your Rental Business

To build your own rent roll, you’ll first need to sit down and decide which insights you’d like to track. Rent rolls focus on rental income, so try to keep the aspects you track on it relevant. A typical rent roll template will include the basics like lease terms, rent amounts, square footage, and tenant names. The larger your portfolio, the more concise you’ll likely want to be. Remember, if your property’s rent roll is getting difficult to update or to glean information from, then you may be overcomplicating it.

Start by finding a rent roll template that suits you and your situation—there are many online. Then export or recreate your report onto your spreadsheet software of choice such as Excel or Google Sheets. If you go the physical route, we recommend keeping an online copy as well as a backup. When you use a rent roll, you can program cells to add or subtract certain aspects automatically, which can in turn instantly let you see your profitability. And lastly, make sure that you customize your rent roll specifically to your current and future needs.

If you find that you enjoy using a rent roll and being more aware of your current financial health, then you may also be interested in the other reports that rental software can automatically create for you. Rental property management software, which can often be used in tandem with rental property accounting software, will typically offer automated rent roll reports to let you analyze and find rent roll data. It will keep track of the information that you track and can create rent rolls whenever you need.

Using Software to Automate Financial Reporting

With rental property accounting software, you have access to many other helpful reports and insights as well. Ledgre, for instance, provides Profit and Loss Statement (P&L) generation to its users, which includes all income, expenses, and other details of your rental properties at a specific point in time. P&L reports are useful if you want to deep dive into your business’s profitability over a certain period to assess a potential rising trend in your finances.

Rental property accounting software that generates metrics for you can be great for landlords and real estate investors both experienced and new. The software will compile your data and give you access to your cash flow, your expenses, your budget progress, and so much more. It’s also a great way to keep all of your finances organized, as most software is very customizable and user focused.

Conclusion

Rent rolls are a timeless way for rental property investors and property managers alike to get a quick snapshot of their rental property finances. They’re simple, quick, and accurate ways to ensure that your rental income is flowing according to plan. And whether your rental business is big or small, keeping a rent roll is a great step in the right direction for the planned growth of your portfolio and finances.