Published: 18 June 2009.

Contributed by Ian Brooks of Platinum Resort Brokerage

As Big Kev used to say, “I’m excited!” That of course was the famous quote from the big guy in the loud shirts. This morning I turned on the television and there was our new Big Kev! The only difference was that this one was wearing an expensive suit selling economic news, not cleaning products. Yep! Kev with Swanny by his side, (apparently Moyra has retired), declaring that we are not in recession after all! Well as you know from my previous articles, I am a glass half full kind of guy, so that will do me. Some good news at last! It appears that we are only having a ‘Claytons’ recession and that’s got to be a lot better than the real deal.

Enough light hearted tongue in cheek banter- I do actually believe things are improving in our business. The phones are ringing more often, email enquiries are up and we currently have nine million dollars worth of management rights under contract and due to settle within the next two months. Our own figures certainly reinforce Kevin Rudd’s statement that things are not as bad as you read in the press, or hear from all the doomsayers and talking heads. It is however; fair to say the multipliers on contracted properties have been lower than in previous years. Likewise the forward P/E ratios on the public listed companies have gone back to more conservative levels.

So is now a good time to buy, or to sell? The answer is yes, depending upon your individual circumstance. An old saying in real estate goes-

‘As long as you buy and sell on the same market, timing doesn’t really matter!’ Applying the same principal to management rights now is the perfect time to upsize to a larger building.  You may be selling your existing building at a lower price than may have been achieved, say two years ago, but you will also be paying less to get into a larger property. Have you considered a partnership? Do you know another manager that also would like to buy a larger building? It’s quite possible that you could make more money than you currently do - and only work half the time. There are many scenarios that may work; week on week off, month on month off, or employ staff to do the work for you. Larger buildings and partnerships offer endless possibilities.

Some more positive news to managers with buildings that yield around ten percent R.O.I. These properties have always been more difficult to sell and in periods of high interest rates, virtually impossible. Current low interest rates coupled with increasing unemployment is breathing new life into this sector of the market. We now have buyers that have become unemployed and have little alternative other than to buy themselves a job. Management rights provide a secure income in a work from home environment. Historically these price point buildings have changed hands at lower multipliers than the larger properties, making them particularly attractive for new entrants to the market.

What about if you have just plain and simply had enough and want to buy a caravan or a boat and go travelling? Maybe you want to buy a normal house again? Well there is some great value buying at the moment, there are plenty of cheap boats and caravans around and depending on where you want to live, houses have come down in price as well. Life is too short to be hanging around, sometimes for years, on the market waiting for a top dollar price. If you want to sell, there are buyers around if your property is priced correctly and no that doesn’t mean you have to give it away. Just be a little more realistic in your expectation.

On the other hand if you have good building in a good location that’s still earning money and you simply need some time out, why sell now? If you haven’t locked in your interest rates at higher levels you are probably miles better off financially than you were a year ago. Why not employ some extra staff or a manager with the spare cash and take some more time off! Play an extra round of golf per week, go on a cruise. There are plenty of good relieving managers out there. Selling your building just to have a break, or some extended time away from the property, is probably not the best reason to sell.

A word of advice for buyers that have been waiting on the sidelines to buy, but have been holding off in expectation that prices may fall further . I suggest that you need to carefully consider that strategy. There are plenty of motivated vendors around at the moment, most have already accepted that the multipliers have softened a little and have met the market. We have seen a number of buyers secure some great value deals in recent months and we have seen quite a few others that have missed out through not acting quickly. If you see a building that fits your criteria and you make a reasonable offer I think you will look back on this time and realize that you bought very close to the bottom of the cycle.

If you are thinking of selling now it is imperative to select the right broker to market your property. Be prepared to listen to what they are telling you about current market conditions. Most sellers want to get the best price they can within a reasonable time frame. It is no small coincidence that the agents selling the most properties in this market have been around for a long time. They are brokers with a proven track record and they have a vast network of industry professional contacts. The most successful agents realize that today’s buyer will be a seller in the future and will take the time to find them the right property.

If you are seeking to get the best price for your property, be prepared to pay the standard brokerage rate on commission- discount brokers give discount service! The current economic climate has seen the banks re pricing risk and policy in relation to their management rights lending. It is vitally important that your property is prepared for sale in such a way that once a contract is signed it will pass all scrutiny and due process required to obtain the buyers finance approval. Top shelf brokers have sold hundreds of properties over many years; they have been through numerous economic cycles and have experienced this type of market before. Hence, will be acutely aware of what course of action is required to sell your property.

Likewise if you are a buyer in the current market it is important to find an agent you can trust. A good agent will seek to find you the right property and not just try to sell you anything for the sake of making a sale. They will have an in depth knowledge of what has sold recently and for what price and know of potential properties that may be coming available on to the market in the future. It may be that the perfect property for you is not currently for sale. In fact we regularly match buildings to buyers early in the process and its not unusual for a sale to occur within a few days of the property going officially to market. So turn off the T.V, throw away the financial papers and get on with it. Listen to Big Kev  ‘what recession?’  It’s time to buy and time to sell!

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