Information Guide » Pricing & Finance

MANAGEMENT RIGHTS PRICING

How Is The Asking Price Calculated?


As a going concern business, the purchase of management rights is the purchase of an income stream. Essentially, the price is calculated as; Net Profit For Sale (income) by Years Earning Factor (Multiplier) equals Value/Price.

Example: Net profit For Sale $150,000 x Multiplier 4.75 = $712,500 Price. 

The banks and their valuers have a significant input into these multipliers for lending purposes.

As a guide for tourism / residential management rights related businesses , the following multipliers would be applicable.
 
$50,000 to $100,000 nett  ~  2.5 to 3 times 
$100,000 to $150,000 nett ~ 3 to 4.2 times
$150,000 to $250,000 nett ~ 4 to 4.9 times
$250,000 to $500,000 plus nett  ~ 4.75 to 5.25 times
Please note that the above multipliers are indicative only, as with any business or property opportunity placed in a competitive situation, someone may pay above the market for a desired business.

Variations in multipliers can be affected by a number of factors including, location, age, size, livability, and desirability. 

Generally speaking an additional 5-6% can be factored in to cover professional fees (legal, accounting, valuation) and government stamp duty. 

Important Factors To Consider Influencing Value:
  • Business type - permanent/holiday/student/short stay corporate
  • Location - CBD/suburban/tourist destination
  • Income - both overall income and the income being generated for each lot in the letting pool. Businesses at both ends of the income scale (low and high profit) will have a smaller pool of willing buyers, so they may achieve a lower multiplier than a complex with a mid range income
  • Number of lots in the complex and in the manager's letting pool
  • Body corporate salary - the salary amount and the way in which the salary is reviewed or adjusted 

How Much Can I Borrow?

Management Rights don’t carry the same operational and cash flow risks associated with the majority of other types of going concern businesses. In fact you could be forgiven for thinking the Banks love Management Rights. It is essential you consult an experienced management rights and accommodation finance specialists when considering your next purchase. For more information on borrowing against a management rights business check out one of our preferred finance suppliers who offers some great information relating to management rights finance.

What Ingoing Costs Do I Have To Budget For?

The greatest acquisition expense comes in the form of Government Stamp duty. This fee is calculated on a sliding scale with a top rate of 3.75% of the business purchase price. If a residential manager’s lot is purchased in an individual’s name and is their principal place of residence for 6 months or more, the purchaser will not pay capital gains tax on the residence. 
Other expenses include;

Accountant’s fees
Legal fees
Finance Application fees
Real Estate License fees

In a typical purchasing scenario these fees will equate to an additional 5-6% on top of the purchase price.