What Are Management Rights?
Management Rights (also known as Management Letting Rights, MRs or MLRs) are businesses that manage unit complexes. They consist of 3 components: a unit owned by the manager to live in; a caretaking agreement paying the onsite manager to maintain the complex; and a letting business paying commission for managing rentals within the complex. When you buy MRs, you're buying a house, and a business, combined.
The History of MRs
The concept of MRs, as we know them in Queensland, was invented on the Gold Coast back in the 1970's by a group of pioneering brokers and lawyers who would become some of the leading industry professionals of today. MRs were born out of necessity when people started buying holiday apartments and needed someone to care-take the complex and rent out their apartments when they weren't using them. A formal structure was created for this role and legislation was written into subsequent acts, the latest being the Body Corporate and Community Management Act of 1997 which covers the industry today.
Buying and Selling MRs
The manager generates income in a couple of different ways. Firstly they are paid remuneration from the Body Corporate. They are paid this for undertaking caretaking duties which are set out in a formal agreement between manager and body corporate, the term of the agreement is usually 25 years, and it can be 'topped up' along the way to ensure it never runs out. This is a stable, constant income, typically paid in quarterly instalments - it is the reason many people refer to MRs as being 'recession proof' businesses.
The second revenue stream is commission-based, and this is where a good manager can use their own merit to grow their income and also the value of their MRs business overall. The manager operates a letting business within the complex whereby commission is paid to the manager for renting units. The more units a manager rents, and the more rent they achieve, the greater their income will be. The number of units a manager is authorised to rent is referred to as the 'letting pool'. Growth potential can be identified by spotting a complex with a relatively small letting pool, and a large number of total units, allowing the manager to acquire more units and grow the pool. When the total yearly commission income is added to the total yearly remuneration income, it gives us the Net Profit.
Net Profit plays an important role when buying and selling MRs. If you take the total price of a MRs (let's say it's 1 Million Dollars), and subtract the value of the manager's unit from this (let's say his own unit is worth $600,000 in real estate value) then the remaining value is that of the business (in this case $400,000). If his Net Profit is $100,000 PA, then the MRs is said to have a multiplier of 4 because the business pays for itself in 4 years.
There are 2 main types of Management Rights: Holiday and Permanent. Holiday are related to holiday and resort complexes. The workload is often more in these sorts of complexes as people constantly check in and out of the resort. Of course in general, the reward is also higher with greater remuneration being paid and larger commission being collected (often upwards of 50%!). Permanent complexes, on the other hand, pertain to your typical residential apartment or townhouse complex. In these cases the manager is sourcing and screening permanent tenants, conducting inspections, etc. The workload is usually much less, but the commission is usually far smaller as well (between 7-12% typically).
Who are we?
We are a website dedicated to this industry. We do not sell management rights ourselves (although we are a fully licenced real estate agency) but we do publish the largest collection of MRs for sale in Australia as well as a range of hospitality properties for sale. These sales listings are advertised with us from every brokerage firm in the entire industry. We also maintain a library of industry advice, news, events and discussions, actively contributed by numerous industry professionals. We provide a business directory of professionals servicing the MR industry. Finally, we are an independant Real Estate Agency (licence 3539447) that specializes in marketing residential rental and sales listings within managed complexes.