Rent Roll Analysis & Lease Roll-Off Risk

The rent roll is the most important document in investment real estate underwriting — and the most commonly under-analyzed. Loan officers who glance at the total rent and move on to the DSCR calculation are missing the story that the rent roll actually tells: which tenants pay, how long they'll stay, what happens when they leave, and whether the income you're underwriting will still exist in three years.

Rent roll analysis is forensic work. It's about understanding the durability of every dollar of income — not just its current existence.

Reading a Rent Roll — What Each Column Tells You

A complete rent roll should contain, at minimum: tenant name, suite or unit number, square footage, monthly contract rent, lease start date, lease expiration date, lease type (gross, NNN, modified gross), and security deposit. Additional valuable columns: renewal options (term and rent), personal guarantee status, and any rent abatement periods.

Here's a sample rent roll for a hypothetical 10,000 SF retail strip center — and the analysis questions each line raises:

Tenant	SF	Monthly Rent	$/SF/Mo	Lease Type	Expiration	Notes
National Coffee Chain	2,200	$5,500	$2.50	NNN	Dec 2031	Corporate guarantee
Local Nail Salon	1,800	$4,200	$2.33	Gross	Mar 2026	Month-to-month after
Insurance Agency	1,500	$3,750	$2.50	NNN	Jun 2028	Personal guarantee only
Pizza Restaurant	3,000	$6,000	$2.00	NNN	Aug 2026	Below market; no renewal option
Vacant Suite	1,500	$0	—	—	—	6 months vacant
TOTALS	10,000	$19,450	$2.21			80% occupancy

This rent roll tells several stories immediately: the property is 80% occupied. Two of four active leases expire within 18 months. The largest tenant (pizza restaurant at 30% of income) is below market with no renewal option. The only long-term credit tenant is the coffee chain. The vacant suite has been empty 6 months. This is a materially different risk profile than a first glance at the $19,450 monthly gross suggests.

Tenant Quality — Credit, Not Just Occupancy

Occupancy is a count of bodies. Tenant quality is a measure of whether those bodies will still be there — and still paying — when you need them to be.

The spectrum runs from national credit tenants (investment-grade corporate guarantees, brand name operators with long track records) to mom-and-pop operators whose personal financial strength may be unknown and whose business model may be fragile. Both can be fine tenants. But they carry very different underwriting implications.

For each significant tenant (generally any tenant representing more than 10% of income), ask: what is the guarantee? A lease signed by a corporate entity is only as strong as that entity's financial health. A national coffee chain or pharmacy operating under a corporate guarantee backed by a $2B balance sheet is categorically different from a local LLC operating a single unit with a principal guarantee from someone whose personal net worth is unknown.

Types of Guarantees and What They Mean

• Corporate guarantee from a creditworthy parent. The gold standard. The parent company's financial strength stands behind the lease obligation. When the tenant is a nationally recognized brand, the guarantee is essentially as strong as the brand's corporate credit rating.
• Personal guarantee from the principal. Common for local and regional tenants. The guarantee is only as strong as the guarantor's personal financial position — which you may not be able to assess unless you request a PFS. For significant tenants, consider requesting one.
• No personal guarantee / entity-only lease. The weakest structure. If the LLC operating the business fails, the landlord's remedies are against an empty entity. These are common in certain retail categories (franchisees, local food service) and deserve scrutiny.

Lease Roll-Off Risk — The Forward-Looking Analysis

Lease roll-off analysis asks: what happens to income as leases expire? It's the forward-looking component of rent roll analysis and the area most commonly glossed over in credit memos.

Build a lease expiration schedule by year. For each expiring lease, assess:

• What percentage of total income does this lease represent?
• Is the tenant likely to renew? (Operating history at this location, profitability of the location, market alternatives for the tenant)
• If the tenant renews, at what rent? Is current contract rent above or below market?
• If the tenant vacates, how long is a reasonable lease-up assumption? What tenant improvement costs would the landlord incur to re-lease?
• Does the expiring tenant trigger any co-tenancy clauses in other leases?

Below-Market and Above-Market Rents

Contract rent is not necessarily market rent. A lease signed five years ago may be significantly above or below current market rates — and both scenarios create underwriting implications.

Below-market rents are a renewal risk. When a tenant's lease expires and their rent has been 15% below market, the landlord may seek to increase rent to market upon renewal. If the tenant can't afford or won't accept the increase, they vacate. You lose income and incur re-leasing costs. The risk is highest for tenants with narrow operating margins (restaurants, retail) where a rent increase is a meaningful cost increase.

Above-market rents are an even more significant risk. A tenant paying 20% above current market has economic incentive to find cheaper space when their lease expires — and they will. Above-market rents also inflate the NOI used in your valuation. If you underwrite using current above-market rents without adjusting to market, you're overestimating stabilized value.

Concentration Risk — The One-Tenant Problem

Concentration risk is straightforward in principle and consistently underweighted in practice. When a single tenant represents 40%, 50%, or 60% of a property's income, that property is fundamentally a credit bet on that tenant's continued occupancy — not a diversified real estate investment.

The appropriate underwriting response to high tenant concentration is not to ignore it — it's to stress test it explicitly. What does the DSCR look like if the anchor tenant doesn't renew? Can the property service the loan at 60% occupancy while re-leasing the anchor space? If the answer is no, the loan structure needs to reflect that risk: lower LTV, higher reserves, or a stronger equity cushion.

Lease Types and Expense Responsibility

The lease type determines who pays operating expenses, which affects how NOI is calculated and which expenses the landlord is exposed to.

• Triple Net (NNN). The tenant pays property taxes, insurance, and maintenance/CAM charges in addition to base rent. The landlord's NOI is closer to base rent. Preferred by lenders because the landlord's expense exposure is minimal.
• Gross Lease. The landlord pays all operating expenses. A gross lease requires subtracting actual expenses from gross rent to arrive at NOI. When a gross-leased property has rising expenses (taxes, insurance, maintenance), the NOI erodes even if rent stays flat.
• Modified Gross. A hybrid — tenant pays some expenses, landlord pays others. The specific split varies by lease. Read the actual lease to understand the exposure.

When a property has a mix of lease types, ensure your NOI calculation correctly accounts for which expenses are tenant-paid and which are landlord-paid. A property that looks fully NNN may have one or two gross-leased suites that create disproportionate expense exposure.

Presenting Rent Roll Analysis in the Credit Memo

The rent roll analysis belongs in the credit memo's collateral or repayment capacity section. It should include: a summary table of the rent roll (even if the full roll is attached as an exhibit), a lease expiration schedule by year showing income at risk in each year, an assessment of the top two or three tenants, a note on any below/above-market rents, and your conclusion on the durability of the underwritten income.

The question you're answering for the committee is: "Is the income we're lending against likely to still exist when this loan matures?" The rent roll analysis either confirms that it is — or documents the risks to it and explains why the deal still makes sense despite those risks.