Property managers have been advised to rigorously crunch their numbers when weighing up whether to grow organically or buy a rent roll.
Daniel Evans, national head of real estate at Macquarie Bank, said the key is to create a long-term plan and a clear business strategy.
“Ask what’s the five-, 10-, 15-year plan for your business, then try to work out the best way of achieving that rather than asking whether or not you should buy based on opportunity,” Mr Evans told the National Property Manager Conference.
“If you have to hire a BDM to go and find the organic growth, make sure you cost in the salary of that person, the bonus in terms of acquiring each of those properties and the length of time it would take for you to win them.
“You can almost do a simple calculation of how much those properties are going to cost you, then you can compare that to how much it will cost you to buy the rent roll.”
Mr Evans said research is also important in terms of looking at retention rates and market conditions, and assessing opportunities.
“If your plan is to get to 3,000 properties in five years, then it makes sense to buy since it’s unlikely you’ll achieve that kind of scale quickly enough through organic [growth]. But if your plan is to build steady cash flow, then maybe organic makes sense.”