Thinking to sell your MR? Now is the perfect time.
Considering selling your Management Rights? Now is the perfect time.
Prepared by Robert Collins - Director of Management Rights
The main reason is simple, so let’s review current supply. The major ad portals prior to Covid had more than 1500 listings for sale in QLD. Currently, there are less than 600 listings, therefore 60% less listings and the same number of buyers.
The multipliers should have fallen due to increased interest rates facilitating a reduction in investment return. However due to the high buyer demand and less supply this has not happened. Historically Management Rights have enjoyed between a 15% to 24% return on investment. See the graph from one of the leading Management Rights Valuers, they are on every bank board. This data is bank verified.
As a professional and experienced Broker and a successful past MR owner with industry experience since 2003 am getting very concerned about false promises being made by certain unscrupulous Brokers, an unethical practise causing our industry untold harm. The strategy of “ buying listings” by promising Vendors impossible multipliers versus a genuine appraisal by a professional is unsustainable, clearly the professional broker often loses listing by quoting the real or verifiable multiples.
Then the fun starts, with what is known as “conditioning the vendor.” Typically, the conditioning process commences with “I am sorry the market has rejected your price; we will have to drop it.” Eventually, the price is adjusted to the price to the correct ( lesser) level.
Most of our opposition Brokers are honourable people conducting a job like the Brokers in RAAS are doing. We like to think we do it a bit better and smarter in what we do.
"The facts are that these disreputable Brokers have a fall over rate of one in two!"
The industry average is around one in four. My average is one in sixteen. Why? Because like all professionals I check that the vendor has given me the correct information, buyers have been vetted and know they can get finance. This saves you having to pay the price twice as no lawyer etc are going to say don’t worry about paying as it didn’t go through. We are the only people with the buyers financiers that do not get paid till the deal is settled.
It is imperative you look at the credentials of your chosen broker including their company’s reputation, length of time they have been operating and track record. I would also suggest you speak to your professional advisors (MR recognised lawyers and accountants) and seek their opinion on the Broker and the company they represent.
To make sure all goes well for you, I would also suggest you use an industry recognised accountant for your P&L as well as an industry recognised valuer for your dwelling. The reason is simple “CREDIBILITY”. When a buyer wishes to purchase, he will get his professionals to do his due diligence. The professionals the buyer uses (which will be different to those you have chosen as a vendor) will know each other and the chances of any mistakes is greatly reduced. Therefor no negotiation for a different price. The cost of getting the P&L and valuation done is extremely nominal in the scheme of things.
THE OTHER PLAYERS
Today the sale of MR is very different. Accountants still do their thing. This hasn’t changed much. There are industry benchmarks which they use. Lawyers are a lot pickier. I don’t have a great problem with this as it is important that a buyer is protected as nearly always, they are putting up their complete worldly wealth. There is no comeback for them. As an aside fortunately there has not been many receiverships in the last few years. Valuers do their thing and nothing much has changed. Banks, now this is another thing. We used to get approval for buyers in seven days, currently it takes considerably longer , possibly up to thirty days. All stakeholders must factor this into the contract.
Contracts nearly always have claw backs, in the past only be found on OTP contracts. Again, the buyer is being protected from false incomes. Again, this this is not bad.
BC lawyers for assignment meetings. This is something that has crept into our industry where you have some extremely vicious companies operating in this area. There are several lawyer companies that rort the system by charging three to four times the average amount for working for the BC which the vendor must pay. Please speak to your Broker about this, to be for armed before you talk to your BC manager who appoints them.
Commissions. Experienced Broker wants to be paid for the professional advice , intellectual property work he or she does. Most of the experienced ethical companies have similar fee structures . The old saying “you get what you pay for” We all have similar costs which we must pay up front regardless of if we finish the job or not. A small commission means a small amount of work. Please be reasonable and don’t undermine your Broker fees , commission only sale is a very tough gig. When I started in this industry the standard commission was 5% + GST. O how I wish for the “good old days”.
We at RAAS can help you determine what your complex is worth in the prevailing market please reach out for a confidential and candid discussion . We will not try to buy your business. We will offer you an honest appraisal based on market conditions and the opinion of industry professionals and banks . I would love to give you a 10 multiplier. Very simple I earn more money, but I would never sell anything or worse have to “condition you down over a lengthy, stressful and expense period”.
Notably , RAAS has been operating since 2002 we have just celebrated our twenty first birthday, we are the second oldest MR brokerage company in QLD .