Principals in Queensland are missing out on thousands of dollars in income that their southern peers are generating from rent rolls, a situation that will only change if they spend more time building their property management operations, a leading rent roll broker has claimed.
“In other states such as New South Wales and Victoria, many principals realised years ago that it was in their best financial interest to spend a high percentage of their time building their rent roll,” said Real Estate Dynamics (RED) partner Paul Brooks.
“In these southern states, rent roll sales are achieving $3.50-$4.50 per $1 [in] annual income per management, yet in Queensland, the average price currently achievable is only between $2.50 and $3.00 per dollar annual income, with some buyers attempting to ‘steal’ them [for] less than $2.50 per dollar annual income,” he said.
“For a buyer to pay the higher prices in QLD, these rates are considered to still be at a ‘bargain’ price for an investment that is usually positively geared.”
Mr Brooks, whose company handles rent roll transactions across Queensland, said principals need to focus on generating a ‘critical mass’ - the number of properties that is required to pay for all of the agency overheads and the principal’s “substantial income”.
“In most cases the critical mass required is in excess of 500 managements, but variables occur and are subject to individual office costs and how much income a principal wants to earn,” he said.
“[Based on] our Real Estate Dynamics rent roll brokerage history sales data, the average rent roll size in Queensland is much less. about 150 properties.
He said despite flat sales market conditions, too many principals remained wedded to sales over property managements.
“Many principals continue to go to their agency each day to work and spend all of their time, energy and money into chasing the often ‘illusive’ sale rather than working more on securing ‘critical mass’ in the rent roll,” Mr Brooks said.
“Don’t get me wrong; I am not advocating principals stop selling real estate and only focus on their rent roll.
“Sales will always be a key area of the agency business, however, it is crystal clear that the balance must be right, with more of a principal’s time focused on their rent roll to achieve the ‘critical mass’ needed for financial freedom, with the income from their sales division being added as ‘cream’ on top.”