Management Rights, a Beginners Overview

Ever returned from a seaside apartment getaway and thought, ‘How can I make this holiday feeling last forever?’ Many management rights business owners started their journey with this very same thought.

The Business Basics About Management Rights

Management rights businesses were pioneered by property developers in the 1970s to centrally co-ordinate the day-to-day maintenance and management of rental properties within community/strata title schemes (several individually owned lots within a defined development).

While a larger proportion of existing businesses are concentrated in Queensland, opportunities in other states are only increasing.

When you purchase a management rights business, you are typically buying:

  • an onsite residence (that may also include title to an office/reception area)
  • the rights to provide caretaking services such as gardening, cleaning and maintenance of common areas (e.g. pool, lawns, gardens, tennis court) for an agreed salary
  • the rights to provide letting services for agreed commissions
  • the rights to provide additional services to residents/guests as agreed by the body corporate (i.e. equipment rental, linen services)

Types of Management Rights

There are several different types of management rights, including:

  • Holiday letting – resorts, apartment complexes
  • Corporate letting or CBD short term stay complexes
  • Residential letting – e.g. suburban town house developments
  • New management rights (off the plan)
  • Mixed management rights – could be both short and long-term letting or resi/commercial
  • It’s also possible to purchase ‘business only’ management rights that do not include an onsite manager’s residence.

Cost of Management Rights

The cost of the business will equate to the cost of the manager’s unit (if applicable) PLUS the value of the actual business, which is ascertained using a multiplier of the most recent 12-month period net operating profit (NOP).

The market value of the manager’s unit (often referred to as the manager’s lot) is determined by comparing unit sales within the complex and similar manager unit sales in surrounding complexes.

The size of the multiplier is directed heavily by market conditions, which includes the influence of banks and business valuers.

Typically, the multiple ranges anywhere from 2.5 to 5.5 (although 6+ multipliers are not uncommon in today’s market) and can depend on:

  • Net Profit
  • Location
  • Age and size of property
  • Occupancy rates
  • Agreement term
  • Market demand
  • Legislation (existing or pending)
  • Income composition (i.e. letting vs maintenance)
  • Interest rates

If you are thinking about the possibility of purchasing management rights and would like to know more about the industry, please feel free to contact Hotel Resort Sales on 1300 946 921 to see how we can assist you.