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The advantages of Corporate & Permanent Letting businesses are in bold
What Are Management Rights?
Management Rights are a form of business enterprise. Essentially, it involves the owner of the business engaging a contractual agreement with the Body Corporate of a multi-unit complex to supply certain services, in exchange for a salary, and the right to earn further commission and services income from individual owners in the complex.
This letting business engages a contractual agreement with the Franchisor who has 10 years of successful trading history to supply serviced apartments to government and corporate clients for 14+ days or 12 month stays. The profit margin in this letting business is 40% from the rent collected.
Simultaneously with purchasing a Management Rights business, the resident unit manager purchases the designated "Manager's Unit" in the complex. It is from this unit that the Manager runs the business.
You do not need to purchase a manager’s unit, in fact you can live anywhere. The current owner lives in Sunshine Coast and he has only been in Brisbane 6 times the last year. The part time staff are meeting and greeting the guests.
Many people regard Management Rights as the ultimate home-based business, offering lifestyle, excellent return on investment and good re-sale potential. You get to choose the hours you work, there’s always a high stable income coming in and you have the opportunity to meet a lot of new people from various industries.
This Corporate & Permanent Letting business is similar but better, this business is also the ultimate home-based business, it is lifestyle driven as most of the work is done online via email, the booking system and phone. Return on investment is much higher than management rights and has great re-sale potential.
You choose the hours you work, there is always a great stable income coming in and your franchisor is consistently generating new business for you. You also have the ability to grow the business as big as you want to if you wish to do some marketing yourself.
How Does The Manager Earn Income?
There are three parts to the On-site Manager's duties and therefore three parts to the income.
1. Body Corporate Salary: In all multi-unit complexes, there are areas such as pathways, gardens, pools and tennis courts etc which make up what is called common property. The Body Corporate pays the Manager a salary monthly in arrears to maintain the common property, ensure that the By-Laws are adhered to, and report on any matters pertaining to the complex. The Body Corporate also pays for all the day-to-day expenses of looking after the common property. The Body Corporate salary is usually indexed to the CPI, to allow for automatic annual increases.
In this business you don’t need to maintain any common area, it is a white collar business.
2. Letting Commission Income: The Manager has the right to act as the On-site Letting Agent for investor owners wishing to rent their units to tenants. You are paid commission and management fees by the individual unit owners for securing good tenants, accounting for the rent, and ensuring that the rental property is kept in good condition. For Permanent lettings (usually 6 months and more) you will be paid 7.5% +GST in commission and for Holiday lettings, the rate is normally 12%+GST. A letting fee is usually paid at the beginning of a lease, which is equivalent to one week rent.
The Letting commission is 40% based on trading history.
3. Income from Additional Services: Other sources of income paid by the landlord for the Manager include repairs, maintenance, cleaning charges and monthly statement fees. You can earn substantial additional income in holiday complexes from room cleaning after guests check out, linen hire, telephone & Internet usage, equipment hire, and tour & hire car bookings.
You have the same opportunity to earn above additional income and also provide shorter stays service such as 3 days+, 7 days+. The current owner only does 14+ stays. You could easily increase or even double your income if you provide shorter stays.
Can I Lose Money in A Management Rights business?
The fact that banks enjoy lending for Management Rights would indicate that it's very hard to go broke in this business. Banks don't like risks and because the two major streams of income are easy to verify and it is hard to be defrauded when you purchase. It is however, important to use a solicitor and an accountant who specialise in the Management Rights industry.
Banks lend the same amount to this business as to management rights. Contact us if you need assistance with finance.
Do I Need Any Special Qualifications?
You don’t need any special qualification to operate this business.
What Price Would I Pay For A Management Rights Business?
The Managers Unit is usually sold at market value plus a premium of around 5 - 10% to reflect the fact that it is the only unit within the complex that the business can be run from. The premium can sometimes be more if the property is much bigger in size, has an office on title or has better inclusions.
In this business you do not need to buy manager unit, so all your capital is working capital.
The Business Value is often expressed in terms of a multiplication factor of the net profit for the previous 12 months, before tax and excluding any wages, interest on borrowings and any payment for labour related work which would normally be performed by a 2 person management team. The multiplication factor usually varies from around 4 times up to around 5.5 times.
The value of this business is expressed in terms of a multiplication factor of the net profit for the previous 12 months, before tax and excluding any wages, interest on borrowing and (part time employee’s wage is taking out of the net income) office duties which are performed by a 2 person management team. The seller would consider any serious offers, so you put an offer in now! The return on investment could be much higher than a management rights.
What Affects The Multiplication Factor?
Affecting the multiplication factor will be all of the variables - the likely safety of the letting pool, the position, age of complex, occupancy rates, potential for improvement, condition of manager’s unit, health of the Body Corporate sinking fund, length of time left in Body Corp Agreement and the amount of physical work required from the managers.
When you enter into a contract to buy a Management Rights Business it will usually be subject to finance, subject to legal due diligence, and subject to accounting due diligence. This allows your solicitor to check that agreements and contracts are in order and your accountant to verify the income figure that you have based your decision to buy on.
The same applies to this business.
Why Choose Us As Your Managements Rights Business Broker?
Unlike some other brokers that do not have actual experience being onsite managers, we have over 7 years of experience in property management across Queensland. We can help you assess and select the opportunity that best suits your circumstances and provide on-going support offering you expert advice on the daily operation of a Management Rights business.