How are management rights priced?

The asking price of management rights is usually a multiple of the business’s annual net profit. A management rights business that returns $120,000 a year could be valued at four to five times that (between $480,000 and $600,000).

There are many other considerations that impact the valuation of a Management Rights contract. These can relate specifically to the site’s location, the number of units in the letting pool and the physical layout and size of each unit. More broadly, economic and legislative factors may also impact business performance and the demand for this type of investment (e.g. tourism trends, property prices and industry legislation).

You cannot generally buy a management rights business without also buying a manager’s residential lot. Other costs you need to allow for include fees for your accountant, lawyer, bank charges, stamp duty, and licence application fee. These add about five percent to the total cost of the purchase.

When investigating the market it is very important to get access to information from various industry professionals relating to site performance, condition, location, industry issues and your own business structure, legal and financial position. A chat with a sales agent, accountant, financier and solicitor with industry experience is generally a good place to start.

For a list of reputable industry professionals operating in the Management Rights industry, click here