Auditing Your PM Department: Maximising Value in a Rent Roll Sale
Regular audits of your property management department play a critical role in preparing for a successful rent roll sale. A well-organised and efficient operation not only improves profitability but also makes your rent roll more attractive to buyers. This blog outlines why audits are essential, how to conduct them effectively, and how they impact the value of your portfolio.
Why Are Audits Important?
Your property management department’s performance directly affects the overall value of your rent roll. When buyers assess a rent roll, they look for a well-maintained portfolio with streamlined systems and minimal risks. Conducting your own audits allows you to identify and fix issues before buyers get involved.
As O*NO Legal explains, “A rent roll that is utilising systems and processes will increase its overall value… using systems and processes significantly impacts your rent roll’s productivity and profitability.” Proactive audits give you the confidence that your portfolio will meet buyer expectations, making the sale process smoother and more rewarding.
How Often Should You Conduct Audits?
Monthly audits are ideal for staying on top of operations and ensuring everything is running smoothly. Regular assessments allow you to address issues quickly and make improvements as needed. By conducting audits consistently, you can avoid surprises during the sales process and demonstrate that your rent roll has been well-managed over time.
Key Areas to Review in an Audit
A thorough audit should cover all aspects of your property management department. Some essential areas to focus on include:
Financial Review
Analyse revenue and expenses.
Monitor arrears and vacancy rates.
Identify ways to manage costs more effectively.
Compliance Check
Ensure tenancy agreements and landlord contracts comply with regulations.
Verify that safety standards are met.
Operational Processes
Review workflows for efficiency and accuracy.
Assess the use of software and tools.
Identify any bottlenecks in processes like maintenance requests or inspections.
Client Relationships
Evaluate landlord and tenant satisfaction.
Review feedback to identify areas where services can be improved.
Portfolio Assessment
Assess the condition and performance of the properties under management.
Highlight underperforming properties or those with recurring issues.
Why Use an External Auditor?
Audits are time-intensive and require a detailed understanding of your operations. Assigning this task to someone already working within your team may compromise objectivity and thoroughness. An external auditor can approach the task without bias and focus entirely on the review process.
Engaging an outside professional also creates a space for honest discussions about performance, allowing business owners to address challenges openly. This fresh perspective can uncover opportunities for improvement that might otherwise be missed.
The Impact on Rent Roll Value
Every audit you conduct is a step toward maintaining or improving the value of your rent roll. Buyers pay close attention to metrics like arrears, vacancy rates, and the efficiency of your systems. A well-organised department assures potential buyers that the portfolio is a solid investment.
The valuation of a rent roll is typically determined by multiplying the annual management fee income by a market-based figure. For example:
$150,000 (annual management fees) x 2.85 (multiplier) = $427,500 (rent roll value).
A rent roll with strong processes, accurate records, and minimal risks is more likely to attract a higher multiplier. Buyers are willing to pay more for portfolios with fewer operational headaches.
Preparing for a Rent Roll Sale
Auditing is not just about fixing problems. It is about demonstrating the quality of your portfolio. It reassures buyers that your rent roll is well-managed, compliant with regulations, and ready for seamless integration into their business.
By making audits a routine part of your operations, you can confidently approach the sales process knowing that your rent roll is in the best possible condition.
Start Your Audit Journey
If you are preparing for a rent roll sale or want expert advice on optimising your property management department, book a free discovery session with me at Rent Roll Mastery. With years of experience in the field, Aaron offers practical insights to help you secure the best outcomes.
Regular audits ensure that your portfolio stands out, whether you plan to sell soon or in the future.
