Buying a Rent Roll- What will Banks lend?

When purchasing a rent roll or agency, buyers need to be conscious of the policies and guidelines adopted by Banks when lending to cash flow business. These guidelines are general in nature and every buyer should make their own investigations prior to entering in to any contract of sale.
Most Banks have guidelines, policies and underwriting standards when it comes to lending to fund the acquisition of a rent roll. Detailed below are some of these underwriting standards;
1. Financial institutions will lend a purchaser 2.5 times the EBIT interest cover in the balance sheet of the purchaser’s entity.
2. Banks will lend up to a maximum of 70% of the buyer’s business balance sheet under gearing and will include the existing rent if it has been organically grown.
3. In general terms, Banks would prefer to lend to an agency principal who has a “track record” in running a rent roll and has already up to 200 properties on their books. The principal will need to demonstrate that they have systems and procedures in place to operate the current or acquired rent roll.
4. Banks will generally lend up to 60% loan to valuation ratio. Buyers may need to consider offering additional assets as security in order to bridge the ratio gap. In would be prudent for borrowers to obtain current valuations on their existing assets that they are providing as security.
The Banks most active in lending on rent rolls are, Westpac, Macquarie, and National. For further information call Stephen or Ross for a confidential discussion on purchasing a rent roll.