Frequently Asked Questions and Answers
Can you guess the most frequently asked questions?
The questions usually are usually based around the following but if you have any other questions please call or email for an answer.
Q. What price should we pay?
A. Many variables affect the value of a Management Rights business. For a more details a chat to a Management Rights Valuer can give you more details. The following list of variables will give you some idea of the complexity of the question.
Location, Consistency of income; the number and type of common facilities within the complex; Total income; Number of units within letting pool; Standard or Accommodation Module; Remaining years of the management and letting agreement; Occupancy: Past, present and future bookings; Quality/Age of complex; Level of competition; Source of bookings (marketing plan); Body Corporate remuneration; Diversity of income; Areas on title; Exclusive use areas; Occupational authority areas; and any other rights to occupy common property areas, Rights of letting business (i.e. exclusive rights to Lot 1), Local and international economy, Current and historical market evidence, WOW factor (eg near bye Golf Course/Beach, etc.).
Q. What is the Multiplier?
A. is the goodwill factor used to value the business component of the investment. It is dependent the above list and any risks which may affect the profit of the business. The multiplier is your return on business investment (ROI) expressed as a single number, obtained by dividing the ROI into 100. Thus a Management Rights multiplier of 4 times nett profit will be the same as a 25% return. A multiplier of 5 times nett profit shows a return of 20%.
Q. How much can I borrow? How do I arrange a loan? to buy Management Rights?
A. Talk to a recognised industry finance broker or banker. The banks look favorably on lending for Management Rights. Individual applications may vary but in general you can borrow up to around 60% of the total purchase price including legal fees, stamp duty etc. Some banks may lend more than this (up to 75%) in individual circumstances but greater care must be taken. If you wish to discuss this further please contact us for more information and possible financiers.
Q. How will I be paid as a Management Rights owner?
A. There are dual sources of income;
1. Remuneration (otherwise known as Body Corporate Salary) from the Body Corporate (usually paid monthly in arrears) for attending to the various duties in your Caretaking or Management Agreement.
2. Payment of commissions from your Trust Account for rent collected and other letting activities. Additional dollars can be made for repair and maintenance work in the rental pool units, and tasks not stated in your management agreement. Also other sources of income in short term letting (Holiday/Corporate), you can earn extra income from Internet Access, tour desk, linen hire and cleaning.
Q. Do I need a License and is it difficult, how long does it take to get?
A. Obtaining a license is reasonably simple. The Property Agents and Motor Dealers Act (PAMDA) sets out the prescribed course. The course consists of a number of modules which may vary from time to time and are delivered by Registered Training Organisations? The training can be via face to face classrooms, online or by correspondence and takes less than a week to complete.
Q. Extra costs I have to budget for when I purchase my Management Rights Business?
A. The biggest ” purchase expense” is Government stamp duty. It is calculated on a sliding scale based on the business purchase price. Purchasing the Managers home in individual names allow some concessions which don’t apply to Business buying the unit. Consult your lawyer for accurate estimate as rates are subject to change.
Other expenses to be covered include
• Accountant’s fees (for verification of Nett Profit)
• Finance Application Fees
• Legal Fees
• Real Estate License Fees
• Search Fees
Allow 4-5% of total purchase price for these “purchase expenses”.
Q. Are Management Rights Right for me?
A. You just need to be a people person and be able to relate to people with empathy and positive energy. We have Plumbers, Policemen & women, Lawyers, Teachers, Labourers, Librarians etc., who have been successful. So yes you can do it.
Q. What is the Body Corporate ?
A. is made up of all the individual unit owners in a complex/building, acting collectively. So think of a company, with the unit owners being the shareholders. Instead of a Board of Directors, a Body Corporate has the Committee. Resident Unit Managers, strive to maintain good relationship with their Body Corporate Committee.
Q. Why should you use “Specialist” Professional Advisers?
A. We live in an increasingly specialised world. Your family solicitor may be a an excellent professional, as may be your family accountant, but that does not mean they have the necessary expertise to give the best up-to-date advice on your Management Rights purchase. Likewise, a residential real estate agent who dabbles in Management Rights Industry is seldom qualified to give you advice on the latest trends in the industry.
Q. Can I have a Pet?
A. Obtain and peruse a copy of the By Laws for the particular scheme check to see if it says Yes or No and what conditions they may have. Usually the Body Corporate while be required to approve the pet. Few hi-rise buildings will approve a dog.
Q. Are there office hours?
A. You need to read the Management and Letting Agreements to determine this. You will need to spend time in the office to attend your particularly in holiday businesses and permanents where there maybe walk in traffic which can result in increasing your occupancy.
There are many other questions which may apply to your particular Management Rights business which may not have been answered so please contact us for more information
Q. Living on site or not
A. Check if your agreements allow you to live off site
Sometimes you can have nominee live on site.
This is a question which is asked and requires you have a legal opinion from a experienced management rights lawyer as to whether you can go down this path.
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