Rent Rolls on Properties are Worthless!
Did you know the rent roll is worthless? We looked at a Professional HMO that—per the rent roll— collected over 28,000 a month. I did all my due diligence and being the paranoid self, I wanted to see bank statements proving monies recieved.
The vendor balked…..basically we passed. We mostly refurbish our own Professional and Social HMOs but this on the surface seemed profitable. See we walked we would never know. However you need to know this when buying a professional or social HMO. The rent roll was correct per say. It listed out the information found on the lease – tenant’s name, address, rent, date signed, and maybe a few other things. Anyone who does not hide anything will provide this in the course of legals.
The problem was simple. A rent roll is NOTHING but a listing out of data found on the lease. A rent roll does not mean the money is being collected!
What’s the ONLY way to truly verify cash flow? Request bank statements! We learned this 25 years ago? Bank statements show what is actually deposited into the operating account.
What do you think?