# Property Management Rights



## jersey10 (15 June 2008)

Has anybody had any experience in purchasing management rights for residential property?  I have started looking into it and am wondering if it can be a fruitful investment and also what the lifestyle would be like.


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## nioka (15 June 2008)

jersey10 said:


> Has anybody had any experience in purchasing management rights for residential property?  I have started looking into it and am wondering if it can be a fruitful investment and also what the lifestyle would be like.



 I've been on the wrong end of this. I bought a unit on the Gold coast, one in a block of sixty. The management rights had been sold off by the developer for $350,000 and gave the Manager a contract for ten years at $50,000 per year, cpi adjusted, as "manager". However his responsibilities were not specific enough and he then hired staff to do all the work at the unit owners expense. He got $50,000+ per year for doing almost nothing. I wasn't there when the ten years were up and I doubt if he was either. 
 My sister bought a Gold Coast unit when they lived in New Guinea. Too far away to supervise. The manager used to collect rent but not pass it on and tell them that units at the coast were hard to get good occupancy rates. After a couple of years and after discussing the problem with owners of an adjoining unit they found out that the unit was seldom empty. 
  Looking at it through the managers eyes they probably were very fruitful investments.


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## jersey10 (16 June 2008)

nioka said:


> I've been on the wrong end of this. I bought a unit on the Gold coast, one in a block of sixty. The management rights had been sold off by the developer for $350,000 and gave the Manager a contract for ten years at $50,000 per year, cpi adjusted, as "manager". However his responsibilities were not specific enough and he then hired staff to do all the work at the unit owners expense. He got $50,000+ per year for doing almost nothing. I wasn't there when the ten years were up and I doubt if he was either.
> My sister bought a Gold Coast unit when they lived in New Guinea. Too far away to supervise. The manager used to collect rent but not pass it on and tell them that units at the coast were hard to get good occupancy rates. After a couple of years and after discussing the problem with owners of an adjoining unit they found out that the unit was seldom empty.
> Looking at it through the managers eyes they probably were very fruitful investments.





Does sound fruitful for the manager. Perhaps not overly moral but fruitful nonetheless.  I suspect these instances are not the norm.


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## nioka (16 June 2008)

jersey10 said:


> Does sound fruitful for the manager. Perhaps not overly moral but fruitful nonetheless.  I suspect these instances are not the norm.



 Not the norm but very common just the same. Very common with Gold Coast developments where the developer sells a unit and the management rights together. They usually have a time limit and the body corporate usually negotiates a new agreement after a period. I have looked at a few units on the coast and most have a similar situation. When you see the prices charged for management rights you will see how valuable they can be. In most cases I think they are overpriced.


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## adobee (16 June 2008)

i have not specifically done management rights however i am involved in property, management etc.. i have been looking at rights for a while but have not taken the jump into it .. From what i have seen there are two types there are small developements alot in qld where its say twenty or thirty units in the blocks, its not huge money and more suited to retirees etc  they do some gardening, cleaning, change light globes common areas etc and then also run the holiday lets for the building .. i think this is the reason they have them on small blocks in qld more than sydney as it still is somewhat feasible as the holiday lets are labour intensive and require someone to be on site to run them.. the managers usually make some profit on the cleaning, supplying laundry towels etc.. 

the other side of the coin is larger developements.. from what i can see these can be both high yielding and very costly.. 
costly example seach regis towers sydney, manager 'rose' try austlii or similar legal databse .. i believe court cases are continuing.. (quick summary is that guy bought the rights with vendor finance from meriton, meriton pushes him around abit with proxies etc cause there are building problems, hes not a great operator and owners feel like he is acting for meriton and not him, take the contract to court to terminate it, everyone ends up in court for years solicitors are the only people who win..
high yielding examples i have looked at in sydney large quality blocks (when they are large blocks people dont seem to mind paying the large costs) very rough example as i cant find it now.. $100k salary for ten years plus the current managements looked after by the developers say 100 bring in $80k sale price $700k.. i work it that $80k pa in management fees has a value of around $3 per $1..  i have dont the full figures to take in interest cost etc but felt there was an opportunity as a local realestate agent to buy it.. handle the managements inhouse ie cost affective to add to what you are looking after already and have support staff already.. hire a full time caretake at say $50k (a guy who will work really hard, clean the building, replace lights, arrange / oversea repairs etc make sure owners are very happy etc, be available to show vacant units for us the agent, report to the agent)
this is where i see it as profitable.. i would suggest it is imperative anyone buying them has property management experience..

lastly from what i have seen lending is at around 60% so you need to come up with a fair wack deposit.. 

ohh i think run property boought a fare number when they were buying up rentrolls at top prices.. you might pick up some in a fire sale in the not to distant future.. better idea do a take over of run.. they have a huge management portfolio low market cap and could easily be chopped up and sold off at high profit ..


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## adobee (16 June 2008)

from what i have seen the people so far who do well on them are the ones who get the contracts.. pick up heaps of managements.. organise alot of extra services they are making money on (cleaning apts, cleaning this that, etc etc washing etc ) and then selling the box and dice at a good multiplier...


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## jersey10 (17 June 2008)

interesting, thanks adobee


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