What Is a Rent Roll?

A rent roll is one of the most fundamental documents in commercial real estate. Whether you are preparing to sell your property, refinancing, or simply managing your portfolio, the rent roll provides a clear snapshot of your property's income performance. Understanding what it is and why it matters can help you present your property in the best light to buyers and lenders.

What Is a Rent Roll?

A rent roll is a detailed summary of all current tenants and their lease information for a given property. It is essentially a spreadsheet or document that lists every unit or space in a property along with key details about each tenancy.

For commercial property owners, the rent roll serves as the primary record of the property's income stream. It tells a buyer or lender exactly how much revenue the property is generating, who is paying it, and for how long those payments are expected to continue.

Key Components of a Rent Roll

A well-prepared rent roll typically includes the following information for each tenant or unit:

• Tenant name -- The legal name of the individual or business occupying the space.
• Unit or suite number -- The specific space the tenant occupies within the property.
• Square footage -- The size of the leased space, which is important for calculating per-square-foot rental rates.
• Monthly rent amount -- The base rent each tenant pays per month.
• Lease start and end dates -- The term of each lease, showing when it began and when it expires.
• Security deposits -- Any deposits held for each tenant.
• Lease type -- Whether the lease is gross, modified gross, triple net (NNN), or another structure.
• Vacancy status -- Any units that are currently unoccupied.
• Rent escalations -- Scheduled rent increases written into the lease agreement.
• Additional charges -- Common area maintenance (CAM) charges, utility reimbursements, or other fees the tenant pays.

Why Buyers Want to See the Rent Roll

For any buyer evaluating a commercial property, the rent roll is one of the first documents they will request. It provides critical information that directly influences the property's value and the buyer's decision to proceed.

Buyers examine the rent roll to understand:

• Current income -- The total monthly and annual revenue the property produces.
• Tenant stability -- How long tenants have been in place and how much time remains on their leases. Longer remaining lease terms generally indicate more stable income.
• Vacancy risk -- The percentage of space that is currently vacant and the potential for additional vacancies when leases expire.
• Below-market rents -- Whether current rents are below market rates, which could represent upside potential for a buyer who can raise rents at renewal.
• Tenant concentration -- Whether the property's income is diversified across multiple tenants or dependent on a single large tenant.

How the Rent Roll Affects Valuation

The rent roll is directly tied to a property's Net Operating Income (NOI), which is the foundation of the income approach to valuation. A property's value is often calculated as:

Since NOI starts with the income shown on the rent roll, inaccuracies or missing information can lead to a lower valuation. Conversely, a well-documented rent roll with strong occupancy and market-rate rents supports a stronger value.

Properties with below-market rents may appear less valuable based on current income, but a knowledgeable buyer will recognize the potential to increase rents over time. Similarly, properties with upcoming lease expirations may be viewed as carrying more risk, which can affect the cap rate applied.

Preparing Your Rent Roll for a Sale

If you are considering selling your commercial property, having an accurate and up-to-date rent roll is important. Here are a few tips:

• Verify that all information matches your current lease agreements.
• Note any month-to-month tenants and the terms of their occupancy.
• Include any scheduled rent increases or upcoming lease renewals.
• Be transparent about vacancies and any units with delinquent tenants.

At Sonoma Commercial Buyers, we review the rent roll as part of our property evaluation. We understand that not every property has perfect financials, and we are experienced in working with a range of occupancy levels and tenant situations. Our goal is to provide a fair offer based on the actual income and potential of your property.