Actually, this question is a no brainer, especially for real estate agents, because we all understand the principle of supply and demand -- we live and work with it every day of our working lives. When good listings are hard to come by, those you have on the market achieve a stronger price than what they would if there were an abundance of homes available. Similarly, if there are an abundance of buyers, then the demand will dictate stronger prices for those properties available for sale.
So how does this equate to selling rent roll portfolios? Actually it is exactly the same. When you read news articles and surveys showing that up to 80% of agents are looking to grow their rent roll portfolios, and purchase a rent roll in the next 12 months, it should incite some thinking. If I am considering selling for any reason, then perhaps over this next 12 months might be a good time?
Why do agents sell their rent rolls when they are a good source of cash flow and a good business asset? We see various genuine reasons for principals wanting to sell. It isn’t always about cashing in their asset, although this may be a reason for some. After all, it makes good business sense to get rid of large debt in quiet times or rising interest rate cycles.
We are all at different places in life’s journey, so only you can determine when it’s the right time for you to sell. Some of the reasons we find rent rolls being sold include the following.
We will all get to the stage where life’s priorities bring us to that place where we say “enough is enough, it's time to do something else." We only get one shot at life and there are plenty of other interesting things in this world beside real estate! With the average real estate principal in Australia well over 50 years of age, I have great concern that the majority are giving no, or very little, thought about succession planning for their businesses. (See our previous articles on succession planning in August/September 2010 on our web site under our “Roll Call” series of articles.)
There are many partnerships within the industry, and again because we are all individuals, there comes times when one of the partners may need to move on. An amiable and transparent transfer of their share of the business is important to retaining the friendship that has been built over the years. So, appointing an independent broker like us to handle the buyout or change over of partners makes sure everyone is dealt with fairly and honestly, ensuring ongoing goodwill for all parties.
Rationalising areas of operation:
With increasing travel costs and car allowances to property managers, it is becoming more prudent than ever to ensure you have good geographic access to your rental portfolio. The idea of having a staff member out of the office for extended times due to showing or inspecting properties that are miles away is a false economy. Not only are you paying them to be out of the office but also you are losing their in-office productivity while they are away. So it doesn’t take long to be uneconomical by having a wide spread portfolio. The solution is to package up 30-60 properties in those outer areas and then contact us about selling them off for you.
Relocation of office:
Location can make a lot of difference to the market you are involved with. We are seeing more and more agents considering the idea of relocation to improve their market. It may be to take advantage of a significant new subdivision, or to an area that provides stronger rental growth for their investor clients. Selling and cashing up so you can make the move can be a smart way to develop your business.
If you would like to discuss any of these options with us then feel free to email or give us a call. Naturally, confidentiality is assured.