24 Jun 2020
Words
Gareth Closter
Management rights and the effect of coronavirus
Clearly, the topic dominating conversation at the moment is the coronavirus. Today I'm here to talk to you about the coronavirus and its effect on the permanent management rights market. In short, if any of these events have shown is just how resilient to broader economic events these businesses are.
They're strong cashflow businesses and that cashflow comes from two main sources. Firstly, the letting. This is derived from people's rent, and rent is one of the first bills people will pay. Especially at the moment where you see many people working from home, this is really extremely important. And that rent isn't held by the managers, it's held in trust and paid out at the end of the month. So, there's great security on that cash flow.
The second main source of income for these permanent management rights comes from the caretaking salary. Caretaking salary again is generally paid monthly, so it shows what a great cashflow these businesses have. There's strong security over this income because the body corporate has powers to ensure that the levies are paid and if anything, they can borrow money, if needed, to pay managers. With current events, if anything, a manager's role has never been so important in a building. We've obviously seen an increase in the need for cleaning and sanitisation and that's one of the manager's general duties. So again, we see it is highly important.
Secondly, the procedures and protocol in buildings, to see that enforced is an extremely important role that a manager plays. I don't think managers have ever been as important as they are in the current environment.
Lastly is the bank's appetite and we haven't seen that change at all. Given these businesses have such strong cash flow and security over it, we don't see that changing in the short to medium-term future. I myself have five of these businesses currently under contract. I've been selling them for the last five years. I specialise in Brisbane permanent management rights. And I've always said that they are businesses that stand up to broader economic effects, that's why we achieve the multipliers we do. So in summary, we are achieving record multipliers and I think these events really clearly show why we are achieving record multipliers and why we should be doing that into the future. We don't see this stopping anytime soon.
There's never been a better time to list and sell your management rights than at the moment. And alternatively, if you're out looking for a business, we've got great businesses on the market. I hope you and your family stay safe and stay well.
Gareth Closter
0423 182 766
Take a look at Gareth's videos and others from our video library.
