Hi there,
We purchased 1BR apartment off the plan in Palm Cove’s 4.5 star resort.
The resort was completed in September 2004 and 1 year 7% rental guarantee expired in September 2005.
The occupancy rate for 2005 was 52% but unfortunately 45% were promotional weeks (flat rate of $200/week and no management fees). As you can imagine this situation generated minimal returns and raised great concerns amongst the owners in regards to the management.
There is currently an initiative from one owner (supported by others, but don’t know how many) to withdraw units from the letting pool and outsource letting to other parties.
This is the proposal:
“1. A company is formed with participating unit holders having a one (1) share holding.
2. This company would market and manage the units on behalf of the shareholders.
3. Management fees are set at 18% including advertising budget of 4%.
4. Tariff to be reduced to $160 per night per unit during low season and high season tariff to be discussed and set by shareholders at a later date.
5. All company shareholders to share in all profits generated from the venture.
A return of 6% is achievable as well as profits from the company.
If the proposal is acceptable to all owners then it will be taken to the next level and legal advice sought as to the operation of the venture.â€We are currently paying 43% management fees plus all other costs.
Does anyone have any thoughts or experience with the similar situation?
Any comment appreciated.
Thank you
MKNot the same thing, but a girlfriend of mine bought the management rights to an apartment building on the Gold Coast. The deal was some had already been sold by original developer to Japanese people and she was to get management fees from any others sold. Except they never seemed to sell any others and. Ts the japanese only let to their own tourists so she had to pay back this massive mortgage from the occasional tourist that let the apartments. She was going downhill backwards when she realised what was going on and only got out by the skin of her teeth.
Management fees of 43% plus costs sounds massive to me, I cant remember what she was supposed to get. Sounds like the seperate leasing company would be a better way to go. You would have to read your contract to see if they will let you do that. Pooling all the rental money would probably benefit you but the “better” 2br apartments with better views etc. might not be as happy, on the other hand the woeful occupancy rate means you all have to do somethingFern
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