Over the years I have listed several rental properties my brokerage does not manage. I always request copies of the leases and the current rent rolls. The rent roll typically contains the tenant deposit, lease expiration date and the monthly rent paid by the tenant. One time when I tried to correlate the rent rolls to the leases and the income on the owner statement there were a few that did not add up. For example, the property manager was charging an additional $75 administrative fee each month if the tenant did not sign another 12-month lease. The lease did not indicate who received this fee, i.e. the owner or the property manager. When I looked at the owner statement it was not clear. When I questioned the property manager the response was the property manager kept some of the administrative fees and some were split with the owner. However, the leases did not reflect this. When trying to figure out the cash flow and CAP (capitalization rate) the higher the income the better. I felt some money was being left lying on the table because the true income was not reflected in the leases. The actual income was higher based on the owner statement.
It has been my experience if an investor is interested in a property the first thing they will do is try to confirm the income. To do this they will ask for the rent rolls and leases. They may also ask for an owner statement. When the numbers don’t match they are going to ask why. As the listing agent I better be able to answer this question. If I am representing an investor buyer I would look through the leases and rent rolls to confirm the information was accurate. Again, if the numbers don’t match I will ask why.
Another complication comes during the escrow process. The buyer makes an acceptable offer and escrow is opened. The title company will take the leases so they can do the rent proration on the settlement statement. If the leases do not reflect the actual numbers the proration will be wrong.
The bottom-line is it is very important the leases accurately reflect the true income.