Who should be buying lower priced Management Rights Businesses

Published: 18 October 2007.

By Terry McMiles

There is a mistaken belief that lower priced Management Rights Businesses are only suited to Retirees or semi Retirees in the twilight of their working life. IE: People looking for a top-up income to add to their superannuation or pension; who want to have something to do to keep them fit and active and to keep the cobwebs away from their “grey matter”.

That may well be the case for some Resident Managers, but it is by no means the extent of potential buyers for the bottom end of the Management Rights marketplace.

Consider this scenario.

A young Couple want to start a family. In the times in which we live, it is extremely difficult for young people to service a mortgage from just one salary and still live a reasonable lifestyle. Too often, the family is delayed, as there doesn’t seem to be an acceptable compromise. (At least for those people who don’t know about Management Rights)

Management Rights are an ideal business for a young couple starting a family. I will use as an example a business that I currently have for sale. It is very typical of at least half a dozen more that I would expect to have on my books at any one time.

It is a permanent Complex of 21 Duplex style townhouses, on the Gold Coast, with 12 in the “Letting Pool”. The Complex has been well run by it’s current owner who has kept all common areas and the pool in immaculate condition. It is a one person business. There are no set office hours, most people direct bank their rent. It is not a full time job to maintain the complex and the open air work can be easily spread over the week (a couple of hours a day). It is your choice of when to mow, clip & tidy.

For one person working part time it returns $33,000 per year or about $635 per week. Remember that this is a part time job in a business you own, you work from home, with hours to suit yourself.

You can look after a child at home, you can even fit in some other work . . . . perhaps you might be a book-keeper, a website designer, or have some other business interests that can be handled from a home office. . . . the potential for one partner to be at home with the kids while the other partner works their normal job and still contribute to the household income makes Management Rights the ideal business where one partner wants to work from home.

So how will you live? In my example, you are going to live really well. The Managers Residence is air conditioned, has 3 bedrooms, 2 bathrooms, spacious open plan living, an office or study, 3rd shower & toilet, internal access garage plus a 2nd designated car space, a private yard with a paved terrace for outdoor entertaining. The home is lovely.

What will it cost? In my example, the total price for home and business is $475,000 made up of $340,000 for the Residence and $135,000 for the business. If you were to borrow (say)

$300,000 you may still have $10,000 per annum left after interest. You have the tax advantages of a business owner, you have “change” after paying your mortgage, and you still have one whole salary to live on with no rent or mortgage to pay.

But the best part, is that as a Couple, you are in control of your lives, and you will have the luxury of either Mum or Dad being home when the kids are babies and later when they come home from school or kindy. And in today’s terms, this is a real luxury.

Not every business will be exactly like my example. Some residences will only have 2 bedrooms, income may be slightly more or slightly less. You will find that the higher the business value is in the home/business equation, then the higher the income will be. Small Holiday complexes will give a better return again than a small permanent Complex . . . . but you will also have more work and perhaps set hours as you need to greet your holidaymakers.
There are lots of variables, but the bottom line is: A lower priced Management Rights Business is an ideal Business for a young family.

_{Terry is happy to take calls from young people who would like to explore the opportunities in Management Rights. His contact details are on the website}_{www.terrymcmiles.com}