A rent roll shows the income a property is expected to produce under its leases. The bank records show cash received. Comparing the two is a useful part of property due diligence, but a straight comparison of the totals can miss arrears, advance rent and deductions made by a managing agent.
A rent roll reconciliation connects contractual rent to tenant charges, cash collections and the amount ultimately remitted to the property owner. The aim is to explain those movements tenant by tenant and period by period, so an investor can assess the reliability of the income used in underwriting.
This article uses a fictional four-unit property to demonstrate the process. All amounts are illustrative. The example excludes VAT, service charges, incentives and credit notes to keep the arithmetic clear; a real reconciliation should include them where relevant.
Assemble the records for the same period
Start with a dated rent roll showing the tenant, unit, lease dates, contracted rent, payment frequency and any concessions. Request the leases and variations needed to substantiate material terms. An annualised rent-roll figure is not necessarily the amount due in a particular month, especially where rent is payable quarterly or a lease starts partway through the period.
Obtain the tenant ledger, aged arrears report, bank statements and managing-agent statements for the review period. Include the preceding and following periods where available so that timing differences can be followed through. The agent’s detailed cash-allocation report is particularly important when several tenant payments arrive as one owner remittance.
Confirm the property, entity and accounts covered. A payment account that receives rent from several properties cannot be treated as evidence for one building without the underlying allocation. Separate security deposits, service-charge money and other funds from rent, and establish where each is held.
Convert bank activity into a consistent schedule
Where records are supplied as PDFs, Accounts Draft’s bank statement to Excel tool can prepare the transaction data for review. Retain the source statements and check the dates, amounts, opening balances and closing balances before matching receipts to tenants or managing-agent remittances.
Give each receipt a source reference and preserve the original description. Add separate fields for the tenant, property, period covered, allocation category and explanation. Do not overwrite the original bank description with an interpretation, and leave uncertain allocations visible until supported.
If the property owner receives only a net transfer from an agent, that transfer will not identify all the tenants who paid. Reconcile it to the agent’s statement first, then follow the statement back to tenant receipts and the ledger.
Work from rent due to cash collected
For the fictional property, October rent due is £15,000. The schedule below shows how much of each tenant’s October charge has been paid. The receipt allocations are supported by the tenant ledger and payment references.
| Tenant | October rent due | Cash applied to October | October shortfall |
| A | £5,000 | £5,000 | £0 |
| B | £4,000 | £3,000 | £1,000 |
| C | £3,000 | £0 | £3,000 |
| D | £3,000 | £3,000 | £0 |
| Total | £15,000 | £11,000 | £4,000 |
The current-period collection rate is £11,000 divided by £15,000, or 73.3%. That definition matters: it measures cash applied to October rent, not every receipt during October divided by the rent due.
Tenant B also pays £1,000 against older arrears. Tenant D pays £3,000 for November in advance and a £2,000 security-deposit top-up. Those amounts reach the agent during October, but they do not reduce the £4,000 shortfall against October rent.
| Cash received by the agent in October | Amount |
| Receipts applied to October rent | £11,000 |
| Collection of earlier arrears | £1,000 |
| November rent received in advance | £3,000 |
| Security-deposit top-up | £2,000 |
| Total tenant cash received | £17,000 |
Total rental receipts, excluding the deposit, are £15,000. Dividing that by October rent due would suggest 100% collection, masking the unpaid current-period rent. Including the deposit would make the result even more misleading.
Advance rent also carries a future-period obligation: it is cash already received for a period that has not yet occurred. Keep it separate from arrears recoveries and current-period receipts, even when it comes from a tenant with an otherwise straightforward account.
Reconcile the movement in arrears
The property began October with £4,000 of arrears, split equally between tenants B and C. Rent charged during the month was £15,000. Cash allocated against those opening arrears and October charges totalled £12,000: £11,000 for October plus £1,000 for earlier arrears.
Closing arrears are therefore £7,000: opening arrears of £4,000 plus charges of £15,000 less allocated receipts of £12,000. The November advance and deposit are excluded from this calculation.
| Tenant | Opening arrears | October charges | Receipts against these balances | Closing arrears |
| A | £0 | £5,000 | £5,000 | £0 |
| B | £2,000 | £4,000 | £4,000 | £2,000 |
| C | £2,000 | £3,000 | £0 | £5,000 |
| D | £0 | £3,000 | £3,000 | £0 |
| Total | £4,000 | £15,000 | £12,000 | £7,000 |
In a live file, include credit notes, write-offs and other adjustments as separate lines. Do not force the reconciliation to work by reallocating advance rent or deposits without evidence and an appropriate basis.
Tenant C now accounts for £5,000 of the £7,000 closing arrears. Request the payment history, correspondence and subsequent receipts, and establish whether there is a dispute, an agreed concession or a collection problem. Those explanations can have different implications for the acquisition assumptions.
Reconcile the agent’s collections to the owner’s bank
The managing agent does not necessarily remit gross tenant receipts. In this example, the agent deducts £900 of management fees and £600 of authorised repairs, retains the £2,000 deposit separately and holds a £500 increase in the property cash reserve. There are no other changes in amounts held or remittance timing.
| Agent remittance bridge | Amount |
| Total tenant cash received | £17,000 |
| Management fees deducted | (£900) |
| Repairs paid | (£600) |
| Deposit retained separately | (£2,000) |
| Increase in operating reserve held by agent | (£500) |
| Expected remittance to owner | £13,000 |
| Receipt in owner’s bank account | £13,000 |
| Unexplained difference | £0 |
The £13,000 owner receipt is now explained. It would be wrong to compare it directly with £15,000 of rent due and label the £2,000 difference as arrears. The actual arrears movement is established through the tenant ledger, while the owner remittance reflects additional timing and expenditure items.
For a fuller agent reconciliation, bring forward amounts held at the start of the period and carry forward closing reserves, deposits and amounts awaiting remittance. Check expenses to invoices and approvals, and trace late remittances into the next bank statement.
Carry the findings into the property underwriting
The reconciliation should inform assumptions about collections, arrears recovery and available cash. Review enough periods to distinguish an isolated delay from persistent non-payment. Check whether the seller’s rent roll includes concessions or lease changes that have not yet reached the ledger.
The OCC’s commercial real estate lending handbook provides wider context on analysing property income and lease information. For this example, the key investment question is whether Tenant C’s rent should be treated as reliably collectible and what evidence supports the answer.
Do not substitute net owner remittances for net operating income. Remittances may include advance rent and deductions or reserve movements that do not belong in the same accounting period. Underwritten property income requires its own treatment of operating expenses, timing, recoverability and relevant non-cash adjustments.
Keep an exceptions schedule identifying the tenant, amount, issue, evidence required and effect on the underwriting. Leave unsupported allocations unresolved. A complete file should let another analyst trace contractual rent to charges, charges to collections, and collections to the cash reaching the owner. That trail makes the income assumptions easier to challenge before an acquisition is agreed.