What is your trail book actually worth?

Ask a principal what their trail book is worth and the answer is usually the total loan balances under management or a rough multiple of last month's trail. Neither is the number a buyer would pay.

A buyer pays a multiple of your recurring trail income, normalised and net of offset, then moves that multiple up or down depending on how fast the book runs off and how much risk sits inside it. The gap between that number and the one in your head can be large. It matters more now than it has for years, because quality books are worth more than they used to be. The specialist valuer Radar Results put quality residential trail books at 2.75 to 3.75 times annual trail for the period to June 2025, up from around 1.5 times a few years ago. Well-capitalised consolidators are active buyers. The asset has rarely been worth more, but only if you can prove its quality.

This is a plain-English look at how trail books are valued and what moves the number, not valuation, legal or tax advice. The specifics of any actual sale need professional advice.

How a trail book is valued

Trail book valuation is simple to describe. A trail book is valued as a multiple of its annualised recurring trail income. The work is in the two inputs.

The first is the income, and it is not the figure on your RCTI. You normalise it: take the trailing 12 months of gross trail, strip out every upfront, deduct the clawbacks and smooth any one-off distortion like a bulk discharge that flattened a single month. What is left is the true ongoing earning power of the book. Net of offset, that number is often lower than your headline balances suggest, because trail is paid on the balance minus what clients hold in offset, not on the loan amount.

The second input is the multiple. Think of it as the buyer's read on risk and on how long the income will last. Apply that 2.75 to 3.75 times range to a book earning, say, $400,000 a year in normalised trail, and you get somewhere between about $1.1 million and $1.5 million before any adjustment. The same figure sets what you could borrow against the book, since the specialist financiers who lend against trail size the facility on the same metrics. Where you land in that range is decided not by the formula but by the drivers underneath it, and the biggest one is run-off.

Run-off is the lever that sets the price

Run-off is the rate at which the book shrinks on its own, through amortisation, lump-sum repayments, property sales and refinancing. It is the single heaviest lever on the value, and buyers price it closely. Valuers put the residential average at 15 to 20% a year. Premium books hold run-off under 10%, and the very best get near 2%. Once a book runs off faster than 20% a year, it is treated as unstable and discounted hard.

The reason run-off matters so much is the tail. It sets the book's half-life, the time for the income to halve if you never write another loan. At 15% a year that half-life is roughly four to five years. Bring run-off down to 10% and it stretches closer to seven. A buyer paying 3.75 times rather than 2.75 is paying for that longer, more certain tail. Everything you do to keep clients, from rate reviews to servicing the book, shows up here, because a serviced book is a stickier one.

The other levers, and your data

Run-off aside, a handful of things move the multiple. Concentration is the sharpest of them. If one lender holds more than about 40% of your book, a buyer sees a single point of failure, one policy change or repricing that could trigger a wave of refinancing, and discounts accordingly. Premium books keep any single lender under about 25%. Seasoning matters too: loans aged three to five years are the sweet spot, past the two-year clawback window, proven to perform and not yet close to natural discharge. So does credit quality, where a premium book runs arrears under 0.5% of balance.

Then there is your data, which is the factor that turns a good book into an unsellable one. A buyer is not just buying a cash flow. They are buying a client base to market to, so they can slow the run-off and write new business. If your CRM is missing contact details, loan anniversary dates or compliant records, they cannot do that. At best they discount the book to a decaying income stream. At worst they walk. The metrics that set your price all live in your data, and so does your ability to prove them.

Whether you can even sell it

Most brokers get this part wrong. You may not have a clean right to sell your trail book at all. The lender pays trail to your aggregator, and your entitlement to it sits underneath the aggregator's head agreement. A sale needs the aggregator's consent as a condition, and a formal deed of assignment to transfer the rights. Good-leaver and bad-leaver terms sit over the top: exit on bad terms, and the aggregator can freeze or absorb the book, taking its transfer value to zero.

When a sale does proceed, the due diligence is where the price is won or lost. A buyer will audit the book to see who originated the loans. For a principal running a network, that is the real exposure. If the relationships sit with sub-brokers or contractors who could leave and refinance those clients away, the book a buyer thought they were getting can walk out the door behind them. Strong non-solicitation terms binding your writers are what protect it. And because clawbacks can still land up to two years after settlement, expect part of the price to sit in retention for 12 to 24 months to cover them. None of that is a reason not to sell, just a reason to have your data, your contracts and your lender spread in order long before you do.

The question most principals cannot answer

So, what is your book actually worth today? Not the loan balances or a multiple of last month's trail. It is your normalised recurring trail, times the multiple your run-off and concentration would earn, less the discount your data would attract at audit.

Most principals cannot answer that, and the reason is the tools they use. The RCTI reports trail paid, not book value, run-off or yield. A funds-under-management figure sits flat on a dashboard while the book underneath it ages, runs off and quietly loses yield as higher-trail loans discharge and offset-heavy ones replace them. A steady monthly trail figure can hide a book that is shrinking. The number that matters is a moving one, and it is not on any statement your aggregator sends you. It is sitting in your data, waiting to be read.