Buying a rent roll is one of the most common ways for a real estate agency to grow. Rather than waiting for organic referrals or marketing to bring in new landlords, an agency can purchase an established portfolio of properties under management and access an immediate stream of recurring income.
For many agencies, buying a rent roll is effectively the same as buying a property management business, because the bulk of the value lies in the rent roll itself. The agreements, the relationships with landlords, and the goodwill of the business are what drive recurring income.
There are many benefits to buying a rent roll, but also significant risks if the purchase is not carefully structured. This guide explains what a rent roll is, why agencies buy them, the key legal issues to consider, and how proper due diligence can help avoid expensive mistakes.
What is a Rent Roll?
A rent roll is essentially a book of property management agreements. Each agreement is a contract between a landlord and the managing agent that authorises the agent to collect rent, handle repairs, manage tenant relationships and ensure compliance with tenancy law.
The real value of a rent roll lies in the management fees charged on each property, usually a percentage of the weekly rent. A rent roll may consist of a few dozen properties in a boutique agency or several thousand in a multi-office network.
When you buy a rent roll, you are buying the right to receive those ongoing management fees and the goodwill of the landlord relationships that underpin them.
Why Agencies Buy Rent Rolls
Rent rolls appeal because they offer:
Immediate scale – growth that could take years to achieve organically.
Recurring income – a predictable stream of management fees.
Geographic expansion – entry into new suburbs or regions.
Operational synergies – existing staff and systems can often handle a larger portfolio with only marginal increases in cost.
For example, a real estate business managing 150 properties might acquire a neighbouring rent roll of 200 properties. Overnight, the business has more than doubled its managed portfolio, strengthened its brand presence and increased the value of the agency itself.
Key Legal Issues in Buying a Rent Roll
Licensing and Compliance
Under the Property and Stock Agents Act 2002 (NSW), only a licensed real estate agent can provide property management services. All management agreements must comply with the prescribed form and disclosure requirements set by NSW Fair Trading.
Assignment of Management Agreements
Property management agreements are personal to the agent originally appointed. This means they cannot simply be transferred in bulk – landlord consent is required. In practice, this usually involves landlords signing a deed of assignment or consent form. If landlords refuse, those properties will not transfer, which can materially reduce the value of the rent roll.
Staff and Employment Obligations
If existing property managers are moving across to the buyer, accrued entitlements such as annual leave and long service leave must be addressed in accordance with the Fair Work Act 2009 (Cth). Failing to account for these costs can significantly affect the economics of the purchase.
Restraints of Trade
Often a buyer will want a seller to be restrained from setting up a competing agency and soliciting clients back. A restraint clause usually specifies a geographic area (e.g. within 5 km of the agency office) and a period of time (e.g. 1–2 years).
Hidden Liabilities
Even though a buyer may simply be purchasing the assets of the business and not taking over the seller’s company, problems can still arise. These may include:
Mismanaged bonds or arrears
Tribunal proceedings at NCAT
Unresolved landlord or tenant complaints
Non-compliance with trust accounting rules
Asset Sale vs Share Sale
Most rent roll purchases in NSW are structured as asset sales. Understanding the distinction between asset and share sales is important for buyers.
The Due Diligence Process
Thorough due diligence is the single most important step in any rent roll acquisition. It should cover:
Financial Due Diligence
Average rent per property.
Average management fee percentage.
Arrears and vacancy rates.
Churn rates – how long landlords typically stay with the agency.
Distribution of landlords – whether income depends heavily on one landlord with multiple properties.
Legal Due Diligence
Validity of management agreements – are they in the correct form and properly executed?
Licensing of the agency and all staff.
Trust account compliance with the Property and Stock Agents Regulation 2022 (NSW).
Any history of disciplinary action by NSW Fair Trading.
Operational Due Diligence
Staffing levels and experience of property managers.
Capacity of existing software and systems to manage a larger portfolio.
Internal processes for arrears, maintenance and compliance notices.
How Rent Rolls are Valued
Rent rolls are generally valued based on the annual management fee income they generate. The value can vary significantly depending on a range of factors, including:
The average management fee percentage charged
The location and quality of the properties under management
The spread of landlords and whether income is concentrated with a small number of clients
The history of landlord and tenant retention
The agency’s compliance record and whether there are outstanding disputes or regulatory issues
A careful review of these factors is essential to determine whether the asking price for a rent roll is justified.
Common Pitfalls When Buying a Rent Roll
Even experienced agents can make mistakes when buying a rent roll. Common pitfalls include:
Overestimating landlord retention – landlords can terminate their agreements on notice, so not all will stay after the sale.
Invalid agreements – missing signatures or non-compliant forms can make agreements unenforceable.
Poor arrears management – high arrears can indicate a badly managed roll and future cashflow problems.
Underestimating staff needs – service standards can slip if the roll is too large for existing staff to manage.
Weak restraint clauses – without strong protections, the seller may establish a new agency and lure landlords back.
Steps in the Purchase Process
Heads of Agreement – sets out the commercial terms, including price multiple and settlement structure.
Due Diligence – financial, legal and operational checks.
Contract for Sale – the binding document governing the transfer, including adjustment mechanisms, restraints and warranties.
Landlord Consents – obtain consents for each property under management.
Settlement and Handover – trust account reconciliation, transfer of files, staff introductions and communication with landlords and tenants.
The Role of Lawyers and Accountants
Both lawyers and accountants play a central role in a rent roll acquisition:
Business lawyers review agreements, draft assignment deeds, negotiate restraint clauses, and ensure the transaction complies with the Property and Stock Agents Act.
Accountants verify the income figures, confirm the valuation approach and check for tax risks.
Together, they help ensure that what looks like a secure revenue stream on paper translates into real long-term value.
Conclusion
A rent roll can be one of the most valuable assets a real estate agency owns. Buying a rent roll is an effective way to expand and increase the value of an agency, but it comes with traps for the unwary. Without proper due diligence, hidden liabilities, invalid agreements or landlord churn can quickly turn a promising purchase into a financial burden.
By carefully reviewing the legal, financial and operational aspects of a rent roll, and by structuring the purchase correctly – usually through an asset sale of the business with strong contractual protections – agencies can set themselves up for sustainable growth.
How Thornton + King Can Help
At Thornton + King, our business lawyers have extensive experience advising real estate agencies on the purchase and sale of rent rolls. We understand the legal and commercial complexities involved – from reviewing management agreements and trust accounting compliance through to negotiating contracts and restraints of trade.
If you are considering buying a rent roll or a property management business, our team can guide you through the process and protect your investment.
Contact us today to speak with one of our lawyers about your plans.
