Prepare You Management Rights For Sale
ADVERTISING AND MARKETING BUDGET
Our job as your broker is to let as many people as possible know that your Management Rights is for sale. The fundamental saying “you cannot sell a secret” always applies and it is true, but how often are we asked to try and do exactly that?
Management Rights businesses sell, on average, every three years and the industry has flourished through this accepted turn-over rate. Click here for our sample marketing.
TIME FACTOR VERSUS EXPOSURE
The fundamental marketing principle is to maximize exposure within the initial marketing time frame which is usually no longer than 90 to 120 days – similar to real estate.
There is good reason for this time frame and for the initial intensity of advertising:
· A Management Rights business is exciting when it is new to the market. Existing buyers looking at other similar properties will be interested and pay immediate attention to a new listing.
· After 120 days this same Management Rights business gets stale. Everyone has seen it, heard about it, thinks it must be overpriced or that there is something else wrong with it. The market’s perception is the reason why it hasn’t sold already.
· Buyers love buying something that everyone else wants
It is important that we maximize the exposure to the market as soon as we list – It is new, It is exciting and it has immediate interest. Our goal is to create competition and urgency with the buyers during this initial honeymoon period.
Our marketing campaign will be developed around this premise. We need to kick-start the introduction of your Management Rights to the marketplace from day one:
· This is why we ask you to focus on the idea of selling
· This is why we ask you to prepare the property for inspection
· This is why we insist on having all of the paperwork in order prior to listing the Management Rights
· This is why we carefully structure the asking price
When we get our first enquiry and our first inspection we want to give you the best chance to convert it into a sale. It may be our only enquiry or it may be our only chance of an offer throughout the whole campaign. If we fault with the presentation, financial statements, caretaking, letting or management agreements then we have wasted our time, money and opportunity. It is unlikely we will get a second chance with the same buyer.
You may have heard “Your first offer is your best offer”, whether this is right or wrong it highlights the fact that the first enquiries need to be handled carefully, nurtured and converted into a sale if at all possible because they may be your last. This emphasizes being prepared.
THE ADVERTISING BUDGET
This is your Management Rights. Whatever is necessary to achieve the highest price for you in the shortest period of time within the current economic environment is what we should be aiming for.
We have already discussed the importance of presentation and being prepared. Now we need you to focus your attention to the exposure needed to achieve the best results. As your broker, we have experience and advice in this aspect.
As a guideline, commercial properties usually budget 1% of the expected selling price for an entire campaign. Setting a budget gets you mentally prepared for how much you may need to invest in getting your Management Rights sold for its maximum value.
A campaign will have a timeframe of approximately 120 days, so the initial stage of an advertising campaign may only require 0.25% to kick-start and get the ball rolling.
After the initial response from the market, we assess our successes and strategic direction for the continuing campaign and any further expenditure can be monitored and amended accordingly. Remember that we are going to try and convert these early responses into a quick sale and if this is achieved, we will not need the entire funding for a 120 day campaign.
We write good advertisements that present your Management Rights to the target market in the best way. We are innovative with our advertising and know that how an ad is succinctly worded and placed is the key.
SIRE Management Rights are specialists and great advocates of this growing industry. Can you think of any other industry that has had, in the last 35 years, the success, growth, lack of bankruptcies and repossessions other than Management Rights?
We promote the advantages of properly managed and well maintained complexes when we engage with developers, owners, corporations and professional bodies. We promote ARAMA and their benefits for supporting the Management Rights industry now and into the future. Where there’s an opportunity for us to make a stand for the Management Rights Industry – We’re there!
Contact us now for the latest market update!
OVERPRICING
Setting the correct price for your management rights is critical to achieving a successful sale with strong buyer competition. We have found that correctly priced management rights sell on the first day of buyer inspections. On the contrary, we have found that overpriced management rights don’t sell. With most banks tightening credit policies, and some banks unable to lend at all, there is a smaller number of buyers for businesses in wider price ranges. Buyers will not look at your management rights business or property unless it makes financial sense.
THE MULTIPLIER
One of the biggest debate issues about Management Rights is the multiplier pricing. Multipliers have fluctuated around an average figure throughout time and this is natural.
For instance, in the 2010’s there was some interesting activity. The MFS collapsed and the Management Rights responded with a downward trend on multipliers. In the easy to get finance years in 2006-2007 multipliers were reaching 6 and 7.
Financiers change their lending policy and when there is a decrease in lending rates the multipliers reduce. It is difficult to derive the ultimate formula to determine the ultimate multiplier in a dynamically changing environment that is controlled by numerous factors.
For instance, a potential buyer has some money and they can choose to invest their money in a Management Rights or a structured term investment. If the multiplier for the Management Rights is too high, the buyer will choose to invest in the bank and get a better return. If the multiplier for the Management Rights is better than investing in the bank, the buyer will choose to buy the Management Rights for a better return.
Economic downturn in the job market also presents more buyer competition and drives a higher multiplier.
The answer to “what is the current multiplier” question is that we need to assess who is in the marketplace and what they are willing to spend. This is what SIRE Management Rights focuses on to find the optimal multiplier. We do not set the multiplier – the market does.
OVERPRICING – THE REAL ESTATE
When the market was quite active in the past few years, it was quite common to price properties approximately 10 to 15% above the expected selling price on the basis that buyers will negotiate when they make an offer. In today’s economic environment this is not the case.
If the price for the real estate component is excessively overpriced, the buyers return on investment also decreases. The Management Rights industry is very transparent and it is standard practice to have the real estate price determined by a licensed valuer if there are difficulties determining the market price through a Comparative Market Analysis.
The business price and the real estate price are open to verification and are often challenged by prospective buyers. The verification process proves the actual asking value and therefore if any of the business or real estate components are incorrectly overpriced the errors will be discovered during the due diligence process and the errors will be challenged.
In essence, overpricing is self-defeating for two key reasons:
1. Overpricing will be detected and challenged in due diligence
2. The prospective buyer will see the advertised asking price and determine the return on investment will be too low and not be interested
If the buyers in the market feel that the Management Rights is overpriced, it is highly unlikely they will enquire and the marketing campaign will be a waste of time and money. Furthermore, even if the price is reduced the buyers will notice this and tend to think that something is wrong with the management rights.
Low offers from purchasers are rare in this industry because of the transparency in setting the initial asking price. As brokers, we fully utilize this transparency when we engage buyers and we prove the asking price with the necessary facts provided by your verifications and valuations. Purchasers are asked to accept this asking price on face value and challenge it only through the due diligence process. If the purchaser’s due diligence report comes in with a variance we agree to re-negotiate and we will come back to you with the not so good news. Just remember to not overprice because this situation happens, and when it happens the purchasers go cold and the sale goes down the drain.
MAKE SURE YOUR MANAGEMENT RIGHTS IS PRICED TO SELL
We estimate that approximately 75% of listings on management rights websites are not sustainable or fundable in today’s market conditions. Do not let your management rights be one of these. If you want to sell then price your management rights to sell and you will have the best chance of achieving your asking price:
· Get an independent valuation of your real estate
· Do not base your price on advertised properties, many are overpriced and won’t sell
· Ask your bank if they would finance your asking price
· Allocate and inject sufficient funds to get your management rights into the right market
Ask yourself these fundamental questions:
· Would I buy my own management rights now with these returns?
· If the returns are not leaving much for the buyers after they pay the bank the principal and interest, then why would they pay what you are asking for a 365 days per year business?
· Will the bank approve the finance?
· Would I buy my own real estate?
If the answer is no then it is likely that your management rights is not priced to meet today’s market and it is probably unfundable. In many instances of overpriced management rights and real estate, we see there is not much left for the potential buyer and the amount is less than the minimum wage. Let’s put this into perspective by breaking filling in the following table to see if there is something left for the buyer and ultimately if your management rights has a good chance of selling.
Our job as your broker is to let as many people as possible know that your Management Rights is for sale. The fundamental saying “you cannot sell a secret” always applies and it is true, but how often are we asked to try and do exactly that?
Management Rights businesses sell, on average, every three years and the industry has flourished through this accepted turn-over rate. Click here for our sample marketing.
TIME FACTOR VERSUS EXPOSURE
The fundamental marketing principle is to maximize exposure within the initial marketing time frame which is usually no longer than 90 to 120 days – similar to real estate.
There is good reason for this time frame and for the initial intensity of advertising:
· A Management Rights business is exciting when it is new to the market. Existing buyers looking at other similar properties will be interested and pay immediate attention to a new listing.
· After 120 days this same Management Rights business gets stale. Everyone has seen it, heard about it, thinks it must be overpriced or that there is something else wrong with it. The market’s perception is the reason why it hasn’t sold already.
· Buyers love buying something that everyone else wants
It is important that we maximize the exposure to the market as soon as we list – It is new, It is exciting and it has immediate interest. Our goal is to create competition and urgency with the buyers during this initial honeymoon period.
Our marketing campaign will be developed around this premise. We need to kick-start the introduction of your Management Rights to the marketplace from day one:
· This is why we ask you to focus on the idea of selling
· This is why we ask you to prepare the property for inspection
· This is why we insist on having all of the paperwork in order prior to listing the Management Rights
· This is why we carefully structure the asking price
When we get our first enquiry and our first inspection we want to give you the best chance to convert it into a sale. It may be our only enquiry or it may be our only chance of an offer throughout the whole campaign. If we fault with the presentation, financial statements, caretaking, letting or management agreements then we have wasted our time, money and opportunity. It is unlikely we will get a second chance with the same buyer.
You may have heard “Your first offer is your best offer”, whether this is right or wrong it highlights the fact that the first enquiries need to be handled carefully, nurtured and converted into a sale if at all possible because they may be your last. This emphasizes being prepared.
THE ADVERTISING BUDGET
This is your Management Rights. Whatever is necessary to achieve the highest price for you in the shortest period of time within the current economic environment is what we should be aiming for.
We have already discussed the importance of presentation and being prepared. Now we need you to focus your attention to the exposure needed to achieve the best results. As your broker, we have experience and advice in this aspect.
As a guideline, commercial properties usually budget 1% of the expected selling price for an entire campaign. Setting a budget gets you mentally prepared for how much you may need to invest in getting your Management Rights sold for its maximum value.
A campaign will have a timeframe of approximately 120 days, so the initial stage of an advertising campaign may only require 0.25% to kick-start and get the ball rolling.
After the initial response from the market, we assess our successes and strategic direction for the continuing campaign and any further expenditure can be monitored and amended accordingly. Remember that we are going to try and convert these early responses into a quick sale and if this is achieved, we will not need the entire funding for a 120 day campaign.
We write good advertisements that present your Management Rights to the target market in the best way. We are innovative with our advertising and know that how an ad is succinctly worded and placed is the key.
SIRE Management Rights are specialists and great advocates of this growing industry. Can you think of any other industry that has had, in the last 35 years, the success, growth, lack of bankruptcies and repossessions other than Management Rights?
We promote the advantages of properly managed and well maintained complexes when we engage with developers, owners, corporations and professional bodies. We promote ARAMA and their benefits for supporting the Management Rights industry now and into the future. Where there’s an opportunity for us to make a stand for the Management Rights Industry – We’re there!
Contact us now for the latest market update!
OVERPRICING
Setting the correct price for your management rights is critical to achieving a successful sale with strong buyer competition. We have found that correctly priced management rights sell on the first day of buyer inspections. On the contrary, we have found that overpriced management rights don’t sell. With most banks tightening credit policies, and some banks unable to lend at all, there is a smaller number of buyers for businesses in wider price ranges. Buyers will not look at your management rights business or property unless it makes financial sense.
THE MULTIPLIER
One of the biggest debate issues about Management Rights is the multiplier pricing. Multipliers have fluctuated around an average figure throughout time and this is natural.
For instance, in the 2010’s there was some interesting activity. The MFS collapsed and the Management Rights responded with a downward trend on multipliers. In the easy to get finance years in 2006-2007 multipliers were reaching 6 and 7.
Financiers change their lending policy and when there is a decrease in lending rates the multipliers reduce. It is difficult to derive the ultimate formula to determine the ultimate multiplier in a dynamically changing environment that is controlled by numerous factors.
For instance, a potential buyer has some money and they can choose to invest their money in a Management Rights or a structured term investment. If the multiplier for the Management Rights is too high, the buyer will choose to invest in the bank and get a better return. If the multiplier for the Management Rights is better than investing in the bank, the buyer will choose to buy the Management Rights for a better return.
Economic downturn in the job market also presents more buyer competition and drives a higher multiplier.
The answer to “what is the current multiplier” question is that we need to assess who is in the marketplace and what they are willing to spend. This is what SIRE Management Rights focuses on to find the optimal multiplier. We do not set the multiplier – the market does.
OVERPRICING – THE REAL ESTATE
When the market was quite active in the past few years, it was quite common to price properties approximately 10 to 15% above the expected selling price on the basis that buyers will negotiate when they make an offer. In today’s economic environment this is not the case.
If the price for the real estate component is excessively overpriced, the buyers return on investment also decreases. The Management Rights industry is very transparent and it is standard practice to have the real estate price determined by a licensed valuer if there are difficulties determining the market price through a Comparative Market Analysis.
The business price and the real estate price are open to verification and are often challenged by prospective buyers. The verification process proves the actual asking value and therefore if any of the business or real estate components are incorrectly overpriced the errors will be discovered during the due diligence process and the errors will be challenged.
In essence, overpricing is self-defeating for two key reasons:
1. Overpricing will be detected and challenged in due diligence
2. The prospective buyer will see the advertised asking price and determine the return on investment will be too low and not be interested
If the buyers in the market feel that the Management Rights is overpriced, it is highly unlikely they will enquire and the marketing campaign will be a waste of time and money. Furthermore, even if the price is reduced the buyers will notice this and tend to think that something is wrong with the management rights.
Low offers from purchasers are rare in this industry because of the transparency in setting the initial asking price. As brokers, we fully utilize this transparency when we engage buyers and we prove the asking price with the necessary facts provided by your verifications and valuations. Purchasers are asked to accept this asking price on face value and challenge it only through the due diligence process. If the purchaser’s due diligence report comes in with a variance we agree to re-negotiate and we will come back to you with the not so good news. Just remember to not overprice because this situation happens, and when it happens the purchasers go cold and the sale goes down the drain.
MAKE SURE YOUR MANAGEMENT RIGHTS IS PRICED TO SELL
We estimate that approximately 75% of listings on management rights websites are not sustainable or fundable in today’s market conditions. Do not let your management rights be one of these. If you want to sell then price your management rights to sell and you will have the best chance of achieving your asking price:
· Get an independent valuation of your real estate
· Do not base your price on advertised properties, many are overpriced and won’t sell
· Ask your bank if they would finance your asking price
· Allocate and inject sufficient funds to get your management rights into the right market
Ask yourself these fundamental questions:
· Would I buy my own management rights now with these returns?
· If the returns are not leaving much for the buyers after they pay the bank the principal and interest, then why would they pay what you are asking for a 365 days per year business?
· Will the bank approve the finance?
· Would I buy my own real estate?
If the answer is no then it is likely that your management rights is not priced to meet today’s market and it is probably unfundable. In many instances of overpriced management rights and real estate, we see there is not much left for the potential buyer and the amount is less than the minimum wage. Let’s put this into perspective by breaking filling in the following table to see if there is something left for the buyer and ultimately if your management rights has a good chance of selling.
Once you have derived a figure for the total remaining income, you need to consider the following:
· Income taxation
· Living expenses
· Health costs
Then you also need to factor in the financier’s general rule of allowing a maximum of 50% of the Nett income to be used as loan payments and finance costs.
Disclaimer: the above information is approximate only and while accurate at time of writing it may change.
DOCUMENTATION REQUIRED TO SELL YOUR MANAGEMENT RIGHTS
There is a significant amount of paperwork that is required to sell the management rights business and the residence. We have divided the required documentation into what we need initially to start the sale and the remaining documents to complete the sale. It is a good idea to get these documents organized so they can be scanned into electronic ‘pdf’ or ‘tiff’ files for efficient communication with all parties involved in the process.
DOCUMENTS TO BEGIN SELLING YOUR MANAGEMENT RIGHTS
To begin selling the management rights we need the following documentation:
o Our Information Memorandum sheet completed with the summary of the property and management rights business
o The QLD industry approved listing forms completed and signed by all parties
o A Pre-Sales profit and loss statement for the current 12 month period prepared by a management rights specialist accountant, less than 90 days old if possible. Contact us for a P& L template for your own evaluation.
o A current valuation for the ‘on title’ real estate components that are being sold, less than 90 days old
o Copy of the Caretaking Agreement
o Copy of the Letting Agreement
o Copy of the Management Agreement
o Any Deeds Of Assignment for the Agreements
o Any Deeds Of Variation to the Agreements
o Inventory list of chattels included with the residential component
o Inventory list of chattels included with the business
o Inventory list of chattels owned by the Body Corporate
· Income taxation
· Living expenses
· Health costs
Then you also need to factor in the financier’s general rule of allowing a maximum of 50% of the Nett income to be used as loan payments and finance costs.
Disclaimer: the above information is approximate only and while accurate at time of writing it may change.
DOCUMENTATION REQUIRED TO SELL YOUR MANAGEMENT RIGHTS
There is a significant amount of paperwork that is required to sell the management rights business and the residence. We have divided the required documentation into what we need initially to start the sale and the remaining documents to complete the sale. It is a good idea to get these documents organized so they can be scanned into electronic ‘pdf’ or ‘tiff’ files for efficient communication with all parties involved in the process.
DOCUMENTS TO BEGIN SELLING YOUR MANAGEMENT RIGHTS
To begin selling the management rights we need the following documentation:
o Our Information Memorandum sheet completed with the summary of the property and management rights business
o The QLD industry approved listing forms completed and signed by all parties
o A Pre-Sales profit and loss statement for the current 12 month period prepared by a management rights specialist accountant, less than 90 days old if possible. Contact us for a P& L template for your own evaluation.
o A current valuation for the ‘on title’ real estate components that are being sold, less than 90 days old
o Copy of the Caretaking Agreement
o Copy of the Letting Agreement
o Copy of the Management Agreement
o Any Deeds Of Assignment for the Agreements
o Any Deeds Of Variation to the Agreements
o Inventory list of chattels included with the residential component
o Inventory list of chattels included with the business
o Inventory list of chattels owned by the Body Corporate
