Management Rights Finance
What are management rights really worth?
This is one of the most commonly asked questions in the management rights industry.
The overall price paid for management rights will consist of two parts:
1. The management rights business
2. The managers lot (real estate)
Management rights, as a going concern business relates to the income stream, the price is calculated as:
Net Profit(income) by Years Earning Factor(muliplier) equals Value or Sale Price.
or by example:
$190,000 X 4.5 = $855,000 (remember the total sale price will include the additional cost of the managers unit)
Important factors to consider
To determine the value of a management rights business, you should consider the following factors:
> business type - holiday/permanent/short term/corporate/student
> location - cbd/suburban/tourism
> income - both overall income and income generated per lot in the letting pool.
> number of lots in the complex and in the letting pool
> body corporate salary and the revision provisions
> occupancy rates for holiday complexes
> identify the opportunity for the business or "blue sky"
With so many variable factors to consider when assessing the value of a management rights business and associated real estate, no two purchase prices or assessed values are likely to be the same.
And remember as with any asset, values are not static and they will rise and fall depending on market changes.