What Are Management Rights?
Management Rights are a form of business enterprise. Essentially, it involves the owner of the business enjoying 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.
Simultaneously with purchasing the 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.
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. See hot listings Click here.
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, see 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, such things as mower fuel & repairs, pool chemicals & fertiliser are expenses for the Body Corporate, not the Manager. The Body Corporate salary is usually indexed to the CPI, to allow for automatic annual increases.
2. Letting Commission Income: The Manager has the right to act as 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. Letting fee is usually paid at the beginning of a lease, which is equivalent to one week’s rent.
3. Income From Additional Servicers: Other sources of income for the Manager include repairs and maintenance for landlords, cleaning charges, monthly statement fees. In holiday complexes, you can earn a substantial additional income from such additional areas as - room cleaning after guests check out, linen hire, telephone & Internet usage, equipment hire, and tour & hire car bookings.
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, 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. See hot listings Click here.
Do I Need Any Special Qualifications?
To legally operate the letting business, you will need to obtain a Restricted Letting Agent's Licence. It is quite easy and involves the study of just 6 subjects through a registered training organisation such as Property Training Queensland, REIQ or a local Queensland TAFE. These subjects are generally undertaken in a classroom environment; however some RTO’s also offer courses online or by correspondence. To obtain a full licence in 5 days please contact us on 0404 331 310 or email here to save time and money.
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.
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.
What Affect 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 amount of physical work that managers are doing.
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.
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 20 years of experience managing a number of multi-unit complexes across Queensland. Not only we can help you assess and select the opportunity that best suits your circumstances, but provide on-going support offering you expert advice on daily operation of a Management Rights business.
See hot listings Click here.