Starting a Strata Agency

I am wondering if anyone here any idea of starting a strata agency business.

My friend has offered me a business opportunity based on my experience working in strata law in my 20s. He is a developer and builds 20-40 unit buildings every couple of years in NSW. He does not need to borrow money but does it all in cash.

He says if I set up a Strata Agency, we could be partners and split the profit. I would have to be the licencee-in-charge and he would be a silent partner and would not be involved in day-to-day running of the business.

The problem is I do not have any licences related to strata management and I would need to start from scratch. From my research I need Certificate of Registration (3-6 days) and then Strata Management Certificate which could take 8-12 weeks if undertaken full time. So potentially I can get all the licencing requirements before end of the year. However, would it be necessary or is there any legal requirement to have any experience working in strata agency to set up the business?

I need to come up with a business proposal by end of the month and need some input from people who have more experience than I.

My general outline is;

1. Get licencing requirements
2. Set up Pty/Ltd
3. Get management of my friends building get a good feel for 1-2 years
4. Create and implement marketing/sales to win strata management in the first two years
5. When there is enough strata plans recruit a junior/senior strata manager on incentive, and I do the marketing and sales to win strata management whilst overlooking the work of the employed strata manager.
6. My main role from this point onwards would be office management and getting sales.


What I need to figure out is the financial side:

When I sought for strata management quotes to different strata management it varied from $1500-$3000 per lot per year. Assuming when he gives the management of his buildings to me
the split 4:6 in his favour and when I win the jobs 6:4 in my favour?

Do you think this sounds fair or should I just make it simple and go 5:5 or ask for base wage plus incentives?

 

You're taking on all the risk by being licensee but not all of the money.

Set it up yourself, be your own business. Give him a discounted rate because he's your friend. Use those managements as leverage to get your own managements in the door.

 

Is he selling the units hence requiring a strata manager? The appointment of the initial strata manager is for a limited period (terminated at first AGM). Check the Fair Trading website.

 

What sort of risk can you envisage?

 

What he wants to do is to create a system where money rolls in even after the sale and setting up strata company and/or building management company would allow him to do that. I have had no exposure to building management but have had the experience writing up minutes for the initial AGMs for developers, attending mediations between owners corporation and lot owner, drafting by-laws etc and was familiar with the old strata management and development acts. I know how strata management act applies.

He doesn't need to sell the units or off the plan as he is fully cashed up and never borrows money from the banks and I thought this opportunity would be great for me to set up something that is mine and he has asked me to write up a business/finance plan/proposal and I would like some kind of advice here.


BTW I need to write up something by next week.

 

Total levies of $750/quarter = $3,000 per year. If management fees were as high as $1,500 - $3,000 where would the money be coming from for everything else? Insurance, electricity, water, cleaner, gardener, lift maintenance, sinking / capital works fund?

I think you should review your quotes. Market prices are more like $150 - $300 per lot per year.

Your financial forecast is optimistically over-exaggerated by a factor of 10x.

 

So it is clearly a bit past the grey side.

If you are prepared to go past grey - include a couple of clauses that exit your guy if he does not live up to his promises.

You give up equity to start with, you do all the work based on a promise of him sending work your way. And does the work need it keep on coming year in year out for the silent equity partner (dead equity partner) to hang around.

What if he does not do anything and you take to this like a duck to water? We know some start up strata managers who have done incredibly well.

And their is a whole bunch of other stuff to consider when starting a business - existing debts, future hopes, spousal involvement and so forth.

 

Your friends proposal is ringing alarm bells with me, my advice is dont if you are going to go to the trouble of obtaining all licences then do if for yourself and start your own business and keep your friend at arms length, and, make sure you seek the advice of a solicitor with experience in this field.

 

@Meisterin - did you go down this path?