Published: 30 January 2009.

Contributed by Jake Clarke of Management Rights Sales

Well 2008 has come and gone, a year we all would all rather forget in the management rights industry, however some would say „a market correction forced upon us‟.

As we gaze with anticipation into that crystal ball and see still diminishing interest rates and for the holiday buildings occupancies are steady, but discounting is rampant. Permanent rentals still have little if any vacancy, general residential real estate continues to be slow to move, but we all realize that 2009 is another year and the start of renewed confidence in the industry.

The continueing drop in interest rates is starting to flow back into the management rights industry. Motivated purchasers looking for another source of income rather than risk their savings in the volatile share market, and are looking at the security offered by the management rights industry.

Unfortunate reduntancies and forced early retirement has started to awaken the management rights industy.The returns after current interest rates are very enticing. There is no doubt the decreasing interest rate will have a large impact into the managements rights industry ,resulting in a greater return on investment.

A professionally set up buying entity will allow the semi retired and active partnership to maximize their return on investment.

Management rights with large nett profits are still excellent buying, taking into consideration low interest rates, long agreements and a carefully planned third year or after exit stratigy. This plan will negate the transfer fee, giving a remarkable return on investment and an anticipated capital gain.

I personally predict large nett profit management rights i.e. nett profits greater than $400,000 after wages will be rarely available and the majority that are for sale will be sold under the radar. Quickly do the sums, total asking price $3,580,000 (inclusive of manager‟s accommodation of say $500,000) and a nett profit of $560,000 after wages. Always remembering your residence is included along with any taxation benefits and anticipated capital gain, depended upon the initial buying entities. In this example the commercial side of the investment will return approximately 11% after interest.

Basing interest at say an overall package of 6.92% this will give a return before tax of approximately 8.72% on entire investment. Remembering I am gazing into the crystal ball as I write this article a week prior to Xmas.

There is no doubt buyer enquiry in the weeks leading to Xmas was strong, however with the exception of a few, all are sitting on the fence waiting for interest to continue to fall.
Think about it, we are starting to come up with two scenarios.

“The Buyer” when do I buy, I want the best possible package money can buy! and then we have the other scenario” The Vendor “ why do I now sell, my returns have never been better and I have to replace my business with another source of income.

In 6 months or so we will have an over abundance of purchasers all cashed up and on the other hand vendors reluctant to sell becourse their returns are still consistent.

Come July 2009 we will revisit this article and say well I told you so, or I will find a quiet location and smash the crystal ball into a million pieces and join the queue of industry merchants of doom.

Leave a comment

619,929 pages have been viewed from this website for February 2012. Please click here if you'd like to reach our audience..