Getting Started -

Published: 30 August 2006.

The rules of buying management rights are fairly simple. There are just three.

Rule 1
Work out what you are worth. Why? Because this will determine how much you can borrow and what you can afford to buy.

When you are working out what you are worth concentrate on liquidating assets (converting your assets to cash).

How much will you get when you sell your home, pay off the mortgage and meet the costs of sale?
How much superannuation do you have available?

It's what's in the bank that counts when it comes to borrowing for management tights.

The amount of cash you have to invest in management rights determines exactly what you can afford to buy because the banks have very clear guidelines about how much they will advance.

As a general rule the banks will lend you 50% of the price of the management rights and the unit against the security of the management rights and the unit alone.

For example, if you sell all your assets and pay off all your debts and have $300,000 in cash, then the bank will lend you another $300,000 to buy management rights and a unit worth $600,000 in total.

The only way to get more money from the hank is to pledge extra property as security for a higher level of borrowing.

Rule 2
Look for what you can afford

Once you know how much you can afford to spend, look at the real estate advertisements to see what and where you can afford to buy. You're wasting time looking at management rights you cannot afford because you won't get the money from the bank to settle.

The specialist management rights agents (and there are only a handful) generally advertise in the major and local newspapers on Wednesday and Saturday in the "Businesses For Sale" classifieds. The ad will give you a brief description of what's available, how much management rights make, what the unit is worth and the asking price for the total package.

"First work out what you are worth. This will determine how much you can borrow and what you can afford to buy."

Rule 3
Have some idea of the type of management rights you want

There are different types of management rights that will appeal to different types of people.

It is helpful when looking at management rights to at least know what's available and the advantages and disadvantages of each type of management rights.

In the next few pages we will go on a tour of the different options available to you.

You'll learn about: