Buying a Property Management Business?

I have started looking into starting up a property management business in either Brisbane, Gold Coast or Northern NSW. At this stage I am a complete newbie, don't have a license, career in a completely different area, just doing some due diligence, seeing if it is worthwhile or not.

From what I can tell holiday letting is more a 24/7 gig, better money but more hassles whereas permanent is less money but can be much more manageable, depending on other factors. I am leaning towards a permanent PM contract. There are some online with around 15-30 in the letting pool that have an ok net profit (around $80-100k), which I see as being a pretty easy to manage job giving yourself more time to expand the business. My wife has a steady job so it would more be a 1 person operation so that needs to be considered.

Things I am aware of are the more owner occupiers in the complex the more hassle you might have, you want the multiplier to be less than 4 for best value and the agreement time remaining is important.

Does anyone have any experience here? Is what I have said above accurate?

Thanks

 

Ola, so you're actually talking about buying a Management Rights business, not a rent roll, from the sounds of it?

It's a lifestyle business - your constraints/considerations would include the amount of time you want to spend working in the business, the amount of money you want to spend to purchase the business and/or attached real estate component, mostly. Considered review of the management agreements is paramount to properly understand your obligations. Unfortunate to say in my experience, sales brokers always undersell the actual work involved (albeit still 'buyer beware' caveat etc), this often leaves people in trouble because they've essentially bought a business not realising how much work is to be done/the cost to outsource that work if they didn't plan on doing it themselves.

Multipliers range based on, in essence, difficulty/rareness to replicate a business - net profit is the main factor in this equation. That is to say, it is harder to find a high performing business (eg. large net profit), therefor they sell for higher multipliers than lower performing businesses. Performance outcomes are a result of many factors and variables. Each complex is different, and there are many different types and flavours of management rights. Again, considered review of the management agreements is paramount to properly understand your obligations.

My personal advice for anyone looking to enter this industry is you first need to be a competent property manager, and if you have zero experience, go and get a job as an assistant property manager at a local real estate office, stick it out for 6 months, get promoted to a property manager and start managing and being responsible for your own rent roll portfolio (mostly - most agencies, the principal or a dedicated person does the bulk of the trust accounting), stick that out for another 6-12 months, then re-visit your idea of buying and operating your own business and seeing if it is right for you.

Caretaking/Facilities Management is the easy part and easily learnt (compared to the property management side which is a professional service and you're competing with the likes of Ray White, LJ Hooker, etc.), it's pretty much unskilled labour (gardening, cleaning, pool, etc.), and the Body Corporate has to provide and pay for skilled labour (plumber, electrician, engineer, etc.). This comes back to your management abilities for yourself and any staff and contractors of the Body Corporate, with an emphasis on achieving outcomes with the various tools at your disposal.

Costs are high - valuations for lending on MLR's range from $1,200-$6,000 for small to medium. Maintaining and auditing your trust account costs money. Various insurances cost money. Software to operate costs money. Stamp duty when you buy, capital gains when you sell, etc. Everything costs money. Quantity of scale/leverage is an important consideration. For example, the cost for me to exist is around $10k a year whether I manage 1 property or 100 properties. In that regard, a bigger business is better, but more work of course but more money too. When the Caretaking contract remunerations are around the $50k or less mark, generally the Caretaker has to provide and maintain their own equipment to do the work - this requires capital and further erodes your already low remuneration. As a rule of thumb, every $100k of Body Corp income should equate to around 50hrs of work.

If you're in Brisbane you can pop by mine and I can give you a lot of information about this industry. You can also head over to ARAMA's website - the industry body (Australian Resident Accommodation Managers Association), they've just launched their new website, loads of helpful info there and events to come along to etc. I started out by assisting and then managing another persons complex to gain experience with out financial risk, and then later bought my own business and have grown it substantially. It's rewarding but I never stop working...

 

Totally agree, experience is the key.

You will need to get a certificate of competency to work in the industry before getting a job, then go on and complete the licensing course (possibly through REIQ). You will then need to apply for a licence, meeting any of the experience criteria required.

 

Thanks for the detailed response Michael, a lot of food for thought in there. Scott, at this stage I am looking into getting the full RE license first and then will go from there. I have about 10 years experience in the hospitality and tourism industry combined with another 15 years in IT. Somewhat relevant is the hospitality experience having worked in resorts and hotels over the country, not so much the IT which I am currently doing.

Not sure how practical getting into the industry at entry level will be having a family but something I can look into. I'm sure more necessary than not though. Perhaps getting a small caretaking/FM role first to get a look into the industry might be another option there.

Just to make it clear when they say managing a letting pool of, for example, 12 properties I assume that means managing the rent roll of 12 properties?

Thanks

 

Correct.

 

Started my adelaide from scratch but bought my gold coast one. Happy to share experiences in private.

If you've no experience in PM (i came from IT), I recommend you do a lot of learning quickly. Its a rewarding yet always challenging industry.

 

whats your opinion on the top 3 hardest/toughest things being a PM?

 

Hardest toughest
1.Getting the Police in for a deceased person.
2.Getting all the fleas that jump on you off in an abandoned property.
3.Red tape
I need to put the Nicest things too!
1.A big pile of presents from tenants and owners on may desk at Christmas
2.Good teamwork.
3.Finding the happy place for all concerned!

 

They are allowed to breed.

 

damn, I thought I was cynical about PM's!!!

 

If your going to do that, consider strata management in Queensland. Only a 5 day 45 hour week. No license requirement, work from home, cheaper set up costs. Sky’s the limit if you want it to grow in future. Can be run under management. But much more to learn before you set up.

 

Don't buy a job

 

I see it as more buying a lifestyle. Each to their own though.

 

I don't understand what the motivation is with this though? Is it mostly financial and profit you're seeking? Or a cushy way to make some money on the side?

I don't think you'll find its both at the same time, and I reckon most of the time its neither - just hard annoying work to make not that much money in the end when your own time and stress is factored in.

There's a lot of other "lifestyle" gigs I'd be buying into well before something like this.

 

All of the above and more....

The more negativity I find around something the more it intrigues me. I would be worried if everyone was saying how easy it was and how I would get rich soon. It reminds me of the time that every forum I found online had people saying it was almost impossible to find IT work in Japan outside teaching English. I don't think I found one single thread back then with a positive attitude relating to that from anyone. Then I actually went over there and was able to secure IT contract work within 3 months and then worked into a different full time role not long after that without speaking much of the language and without a strong technical background. Was best thing I ever did......

A lot of life comes down to perseverance and the right attitude. After that everything else just falls in place.

 

Don't do it!!

Just trying to give you some motivation

 

Are you a people person?

Do you know how to say "No"?

Can you resolve conflict, say, involving noise, garbage and parking issues?

On the other hand, it might be a cruisy ride with neighbours that all get on with each other, where nobody abuses the gym equipment (if any), nor uses the pool (if any) as a toilet.

Or not.

I don't know your background, perhaps you have been a librarian looking for the "quiet life", or an ex-enthusiast of the motorcycle "culture", or a towtruck industry "employee" looking for a little less excitement, being something that doesn't affect your anger management issues.

Anyway, all the best.

 

Is it worth casting your net a little wider - eg WA? Yes the property market is sluggish but property managers charge like wounded bulls there, with a high fixed rate that's suspiciously the same across most agents (often 9.35%). Plus lots of extra charges. Needs new players to come in to give competition.

 

Not sure if you read the entire thread but I spent nearly 10 years in hospitality. I was dealing with guests face to face in resorts and hotels. My current IT role has me as a Service Delivery Manager responsible for several clients well being, multi million dollar contracts on the line here. This is one of the reasons why I think I would like this type of role. It is where my skill set lies... Bob from unit 23 complaining about the water will be child's play in comparison. I am not scared to get my hands dirty either.

Managing a rent roll is what I need to work on and this is why getting the full RE license will be the first task.

Thanks for the motivation though

 

Sorry I am very busy unable to write too much.
Just to comment on the difference between hospitality and MR: One is short-term; if the person misbehaves, you chuck them out and that's about it.
Whereas MR it's longterm, sometimes upto 25 years (if you can last that long). There are plenty of laws and regulations surrounding this industry. The latest being all the "Rental Reforms" by Qld, Vic, NSW. One lot of difficult Tenant or one single Committee is enough to give you hell.
Just food for thought. I wont discourage you, but just hope you are prepared for all the good and the bad...