Our Brisbane broker Frank Matus says opportunity exists for buyers and sellers in a buoyant market — but you have to be nimble.
When I started with ResortBrokers a year ago, the industry was still emerging from COVID. Uncertainty was in the air and multipliers were soaring. Real estate prices were skyrocketing thanks to the great migration from the southern states – over 50,000 new residents flocked to our state in the year to June 2022.
While management rights operators felt the capital growth in their real estate, many of these new residents moved into their investment units creating downward pressure on letting pools. Some operators saw significant drops in their property management stock, which impacted net profits. This had a knock-on effect with many operators preferring to consolidate and stay in their businesses rather than list them for sale, contributing to the lack of supply in the market. Eager cashedup buyers jumped on good opportunities extremely quickly, with simple demand vs. supply increasing multipliers significantly across all asset classes.
Fast forward to the new normal of 2022. We saw the first interest rate rises in over a decade to curb ballooning inflation amid economic turmoil both here and abroad. While interest rates are still at historic lows, it’s worth noting management rights is somewhat unique in this space because it’s one of the few industries that sees body corporate salaries rise annually in line with CPI. Coupled with rising rents, and subsequently rising rental commissions, holding a management letting rights business continues to be an exceptionally strong proposition. So, what does this mean for buyers and sellers?
Unlike residential real estate which has definitely peaked, the management rights market is still hot, especially in certain asset classes. For instance, high net income businesses are still seeing near record multipliers. Only last month, Tim Crooks, our Director of New Developments Nationwide, and I sold a city based MLR for 6.9x. Smaller complexes are also holding the line, especially the add-on “business only” businesses. I sold a city fringe complex for 5.5x in September. So, the story from a vendor perspective is that if you’re looking to capitalise on a buoyant market, it’s best you talk to your broker about selling today, as no one can predict the market tomorrow.
Undoubtably, the economy and rising interest rates will continue to have an effect. This is where the ResortBroker’s team comes into its own, delivering objective advice, feedback and a genuine plan to get to settlement. Our Managing Director, Trudy Crooks, often talks about ResortBrokers being “brokers who settle” rather than “brokers who list.” This couldn’t be truer in a changing market. Our national reach and dedication to personalised service means working with vendors and buyers to ensure they’re putting their best foot forward.
KEY TAKEAWAYS
• The MLR market moves quickly, and so should you
• Line up a broker today to get the jump on your competition
• Residential real estate has peaked, but MR still has plenty in it
For vendors, this means helping prepare businesses for sale, ensuring net profits are maximised, and using industry specialists to help get you there. For instance, using a specialist management rights accountant to prepare the sales P&L helps remove uncertainty and shows prospective buyers the data backs up your sales price. Unclear or inflated P&Ls will always be uncovered in financial due diligence, so addressing any issues upfront makes a business significantly more saleable.
Buyer-wise, that means being proactive, getting your industry specialist team together – lawyer, accountant and finance broker – doing your real estate licencing, attending worthwhile ARAMA training, and, most of all, being ready to move quickly. Work directly with your broker so they know what you’re looking for, are comfortable with your buying position, and can act as your advocate. This will help you get the jump on your competition, putting yourself in a position to buy off market. Good brokers will take your requirements and go knocking on doors for you, which we recently explained to a room of hungry buyers at ResortBrokers Buying in a Tight Market – Off Market Deals seminar.
The takeaway is that despite changing market conditions, significant opportunity exists for buyers and sellers. Succeeding in the management rights industry is about utilising the community and working together, which is where the ResortBrokers team excels. With six brokers in Brisbane alone, coupled with over 30 brokers nationwide, we’re ready to help you uncover and realise those opportunities.
This article was contributed by Resort Brokers.
You can find more information at: https://www.resortbrokers.com.au/
Original article source: https://www.resortbrokers.com.au/learn/blog/prepare-for-tomorrow-today.html