A rent roll is the line-by-line list of who lives in the building, what each unit rents for, when each lease ends, and what each tenant owes. It is the single document that decides whether a small multifamily deal is worth its asking price, because every dollar of value in a rental building traces back to a lease. A pro forma is a projection; a rent roll is a record. The record wins.
The gap between the two is where deals are made and lost. Sellers present a pro forma built on market rents — what units could rent for. The rent roll shows what they actually rent for today, minus concessions, minus delinquencies, minus the units sitting empty. To read one well is to look at it carefully so as to understand its meaning, which is close to how Dictionary.com defines the verb: scrutiny first, interpretation second.
This piece walks through the audit in the order that matters: unit count and rents first, lease expirations second, then concessions, below-market units, and delinquencies. The math here is illustrative — the shapes of the numbers, not anyone's actual building. This is information about how the underwriting works, not investment advice.
What is a rent roll, exactly?
A rent roll is a schedule of every occupied and vacant unit in a building. At minimum it should show the unit number, the tenant name, the current monthly rent, the lease start and end dates, the security deposit held, and the balance owed, if any. Better rolls add the lease term, any concessions granted, and whether the unit is subsidized or rent-restricted.
Two versions of the document can exist, and confusing them is the most common beginner error. The actual rent roll reflects signed leases as they stand. The pro forma rent roll restates each unit at an assumed market rent. Both may appear in the offering memorandum, sometimes on the same page. Always ask which one you are looking at, and price the deal on the actual roll. The pro forma is a hypothesis about the future; the actual roll is the only income the building has ever earned. This connects to our earlier piece, Rent-to-Income Ratios: How Far the Affordability Ceiling Has Stretched.
How do lease expirations change the deal?
Lease expiration dates tell you when you can reprice and when you cannot. A building where every lease expires in the same month is a very different asset from one with staggered expirations, even at identical current rents. Concentrated expirations mean concentrated risk: a wave of vacancies, turnover costs, and downtime hitting at once, or a wave of renewals all negotiated in the same soft market.
Staggering matters for a second reason. If most leases run long past your expected closing date, you inherit the seller's rents for a year or more with no ability to reset them. That is fine when the in-place rents are at market. It is a problem when they are below it, because you have paid for upside you cannot reach yet. Read the expiration schedule against your hold period, and ask what fraction of the roll turns over in each of the first two years.
One practical step: build a simple month-by-month table of expirations from the roll before you look at anything else. If the seller will not provide lease copies to spot-check against the roll, treat the whole document as unverified.
What do concessions hide in the numbers?
A concession is anything the landlord gives up to fill a unit: a free month, a waived fee, a rent discount for the first year. Concessions rarely appear as line items on a headline rent roll. A unit listed at full market rent that actually collected ten months of rent in a twelve-month lease is not earning that headline number.
The fix is to reconcile the rent roll against the trailing twelve months of actual collections, or the rent ledger if the seller provides it. Ask for both documents early. If headline rents and collected rents diverge, the difference is the concession load, and it belongs in your underwriting as a reduction to gross income. A building that has been papering over soft demand with free months will look strong on the roll and weak in the ledger.
How do below-market units distort the pro forma?
Below-market units are the gap between the actual roll and the pro forma. Some are legitimately repositionable — a long-tenured tenant paying an old rent whose lease will eventually turn. Others are not: units under affordability covenants, tax-abatement programs, or voucher contracts that cap what the rent can be regardless of market. The second kind never converges to the pro forma number, no matter how long you wait.
Separate the two. For each unit where actual rent sits under the pro forma rent, ask what mechanism would close the gap: lease expiration and turnover, a renewal negotiation, or nothing at all. Units with a legal ceiling belong in your model at their capped rent, permanently. Units that turn over at market belong at market, but only after you have priced turnover cost — vacancy, make-ready work, and leasing time. A rent roll full of old rents is not automatically a bargain; sometimes it is a building whose income cannot legally grow.
What should delinquency and deposit data tell you?
Delinquency is the quiet killer in small multifamily. A rent roll that shows balances owed — partial payments, arrears, tenants behind since last year — tells you how the building actually collects. High arrears concentrated in a few units is a management problem. Arrears spread across many units is a tenant-quality or submarket problem, and it is harder to fix.
Check three things. First, whether the roll shows a balance column at all; a roll without one is hiding the question. Second, whether security deposits on the roll match the deposits actually held in trust, since missing deposits become the buyer's liability at closing. Third, whether any tenants are in formal eviction proceedings, which affects both timing and the transfer of leases in some jurisdictions — the rules vary by state and city, so the answer depends on where the building sits.
What this means for your underwriting
The audit reduces to one discipline: rebuild the income statement from the roll, not from the offering memo. Start with actual collected rent over the trailing year. Subtract realistic vacancy against the expiration schedule. Add back nothing for upside until a specific lease expiration and a specific market rent justify it. Then compare that rebuilt number to the seller's pro forma and see how much of the asking price survives. For related coverage, see Sun Belt Versus Midwest Rental Yields: A Price-to-Rent Comparison.
Every pro forma is fiction until stress-tested. The rent roll is the stress test. A building whose actual roll supports most of the pro forma is a deal with a margin for error. A building that needs every below-market unit to turn at full market rent, on schedule, with no concessions, is a deal that breaks the moment one renewal goes badly. The roll will tell you which one you are looking at — read it before the lobby, and definitely before the offer.
