An article by Hamish Turner

There are a few different ways to value your what your property management business is worth.  There are many factors that need to be taken into account when valuing a rental portfolio.  The main factors that are required to value a rental portfolio include but are not limited to average rental yield, average management fees, location, other fees collected.

Valuing one’s rental business cannot be $’s alone.  There is much value in terms of sales leads/referrals, there is value in running a team of professionals, and there is value in servicing a local community's needs well.

The two typical ways to value a rental portfolio include a full fees valuation and annualised management fees.  There is a multiplier range that the industry sees – it’s a range that is seen throughout the country and one that increased more recently.  

The reason it has increased in large is due to demand, which has increased more recently.  Legislation changes made several years ago mean that Principals do not have to be licensed to offer property management services.  A subsequent benefit of this change was that let fees could be on charged to tenants without being Licensed. 

Let Fee pools typically make up 15-25% of the overall income a rent roll produces each month which has meant existing agencies that did not have a License have been able to increase their fee revenue.  And new Principals entering the industry do not have the same requirements “of old”.

When valuing a business there are other assets to be considered outside the rental portfolio management rights.  Items including work vehicles, office and IT equipment, website and procedures. 

There are currently 2 of the major Banks here in New Zealand that recognise the value of rent rolls.  This is something that is slowly changing, as rental businesses are recognised more and more. 

Our Australian cousins have for a long time enjoyed all of their major Banks recognising values on rent rolls.  As more and more practitioners join the market and the a higher portion of the market comes under professional management rent roll values will continue to rise.