Published: 19 November 2008.

Contributed by Jake Clarke of Management Rights Sales

Numerous press articles over the last 6 months or so from industry commentators, had started to place elements of doubt about the management rights industry in some potential stakeholder’s heads. I personally fail to understand why.

You do not need a degree in economics to understand that the past continuing rises in interest rates have been the leading factor that sales in the industry have been on a decline. The supply of stock is at an all time high, primarily due to a low turnover in current commercially profitable management rights sales. No arguing that a high number of the management rights currently on the market are overpriced, this has been brought about because the majority of vendors purchased in a very bullish market.

We now need to address the negatives that raise their head in a stagnant market place. We all need to work towards a common goal, and that is to kick start the industry and get on with business. Remembering if we average the last 6 years of the industry, look at past interest rates, previous recessions and tourism down turns, the industry has and will continue to bounce back bigger and better than years gone by.

With the federal government now endeavoring to kick-start the ailing economy, and interest rates seemingly falling on a weekly basis, there probably has been no better time than now to enter the management rights Industry. Unfortunately, redundancies within other industries are imminent due to various businesses; manufacturing and the retail sector all to become victims of the current economic slow down. The management rights industry can cater for the typical “mum & dad” purchaser looking for their next career move.

The management rights Industry can also cater for entire families. The industry has many examples of expanded families working in larger management rights. In an active holiday building, the manager, receptionist, tour sales coordinator, gardener, handyman and cleaners both apartment and common property have all been from the same family and/or close relatives. It is not uncommon for the related family to own two buildings working and marketing the two to achieve better occupancies, resulting in greater income for the family and increased returns to the owners.

The same formula also works in larger permanent type accommodation complexes, as a buyer you may doubt you have the necessary skills to manage a holiday building, however you have good people skills and the desire to tend to the gardens, pool, and tennis court etc. The returns can be very attractive dependant upon the number of rentals and size of the salary.

In this current market place all listings are harder to move, some never even get an inquiry no matter how hard the broker promotes the property. Some of the older and wiser industry minds will remember 33% business returns in the management rights industry, when there were less than a handful of active brokers. It was only around 12 years ago when this was the common occurrence.

In those past times, was the industry undersold? Remembering every sale was around 3.5 times the nett operating profit, regardless of the size of the nett operating profit, and there was little or no real estate gain.

Current management rights business returns of 16-20% are still much more attractive than a hotel or a commercial building, and certainly still out perform motel freeholds.

The management rights industry continues to offer strong legislation, highly accountable records, trust accounts and all the contract checks and balances that are necessary for an impending purchaser. Remembering there are many successful and wealthy vendors past and present.

Let’s face the facts and get on with moving the management rights industry to the next level.

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