Building your rent roll – organic growth vs acquisition

property mgmt

We get asked this question a lot – “What’s the best way to build my rent roll?” Our response – “What are your goals for growth?”

There are two viable methods for building your rent roll – organic growth and acquisition. But, truth is, choosing a method requires you to consider which one best aligns with your business’ growth strategy and goals. The catch – whichever method you choose must be strategically planned, implemented and managed in order for it to effectively build your rent roll and grow your business.

Organic growth

This method builds your rent roll through enquiries generated from planned marketing activities. To strategically plan, implement and manage this method, you must understand your market area. Knowing your area’s statistics, including the potential number of properties that make up your market area, gives you the ability to plan the number of properties that can be gained, average weekly rent of these properties, and the timeframe and rate of growth you can build your rent roll. This method also requires a team that can effectively manage gained properties and retain business.

But, does organic growth align with your business’ growth strategy and goals?

Pros:

  • 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

Cons:

  • 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

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.

But, once again, you must consider if acquisition aligns with your business’ growth strategy and goals by weighing up its pros and cons.

Pros:

  • 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

Cons:

  • 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

As you can see, neither method is perfect. But, what’s also clear is that both methods can effectively build your rent roll. The key is to consider your business’ growth strategy and goals, and choose a method which best aligns with both. Then, ensure you strategically plan, implement and manage your chosen method so you can successfully build your rent roll and achieve your goals for growth.

If you’d like to learn more about building your rent roll through organic growth or acquisition, contact us.

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