A friend from the Eastern states has informed me of his latest acquisition of property manage rights. If what he is telling me is real, then I should be doing the same. The profit received for very little input is rude to embarrassing.
He paid $450K for the rights and a managers unit for a return of 50%. There are 20 units to manage
• He has control of the title deeds for the units
• Charges for every minute of his time on top of the B/C fees
• Has the power to increase his fees
• Does not have to attend meetings himself but can nominate a rep
• No cash out after purchase of the property management rights
• Receives a % of the rents from the units that are tenanted as wellI have no experience in this field and find the tactic a bit unbelievable. Is property management a tradable item, if so are you buying a contract and for how long?
Are management rights that profitable and if so, why don’t we here more about them?
Some of the threads I have been reading do indicate that management over charges, sets their own fees and doesn’t do much for it.Is there anyone who has purchased management rights or has experience in this area?
Thank you, JD.
JPD
Hi,
Yes, I have heard this doen before and it has been very profitable for those concerned.
It is not getting paid to do nothing though, as you receive for fee for managing (i.e. increasing the profitability) of the property.
Conceptually, it’s like a rental management agency paying for the right to receive the income over a set period of time. Now, this does not happen for a house on a single-holding basis, but if you have (say) 20 units each owned by an individual then someone will need to ‘manage’ them for the group.
As for value… something is only worth what someone else is willing to pay for it!
Cheers,
Steve McKnight
**********
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Manamgement rights are very common (many in Queensland) with community title properties. These are the ‘complex’ type properties where there may be 20 houses and a single driveway to access a common road that winds around the complex. They usually have a single pool, bbq, etc for everyone to use.
I have found that most of these types of management right contracts require the manager to live on site. This restricts your ability to buy numerous contracts.
However, I had a client who bought management rights in Sydney to blocks of Strata units and the numbers he provided were exceptional. He did not get a property as part of the deal but the purchase price of the rights reflected this. He now has a thriving little business accumulating more and more management agreements. This type of management seems even easier than the community title style properties and can be done from a home office.
By the way, you can also borrow against the value of the management rights. It is a pretty good deal if you are willing to do the hard work.
Robert Bou-Hamdan
Mortgage Adviser
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