Is Now the Right time to Sell
Could putting off the sale of your business actually cost you money?
3/13/20252 min read
The Queensland Management Rights industry has experienced significant changes in recent years, influenced by rising property values and interest rate fluctuations. With Brisbane property prices reaching record highs and the Reserve Bank of Australia maintaining steady rates since November 2023, many industry experts are contemplating whether the market has peaked.
Recent reports suggest that Brisbane's property market may soften in 2025 before stabilizing, following several years of rapid increases. According to The Australian, property prices have been declining for the second consecutive month, with most capital cities reporting flat or falling prices. Brisbane, however, saw a modest gain of 0.08% in January. This trend indicates a potential slowdown in the market.
In the Management Rights sector, multipliers have remained steady or slightly softened, meaning the primary driver of overall value growth has been the appreciation of managers’ units.
Evaluating the Decision to Sell Now
Consider a scenario where an operator purchased a Management Rights business in 2020:
Net Profit: $100,000
Multiplier: 4.8
Business Value: $100,000 * 4.8 = $480,000
Manager's Unit Value: $450,000 (average two-bedroom unit price in 2020)
If selling now:
Net Profit: Assuming an increase in line with the Consumer Price Index (CPI) year on year, approximately $118,556
Current Multiplier: 4.3
Business Value: $118,556 * 4.3 = $509,791
Manager's Unit Value: $680,000 (average two-bedroom unit price in 2024)
Despite a decrease in the multiplier, the overall business value has increased. Additionally, the manager's unit has appreciated by $230,000 since 2020.
Potential Risks of Waiting
If Brisbane's property prices decline, following trends observed in other capital cities, the decrease in property value could outweigh any potential increase in the Management Rights business value due to a slight rise in multipliers.
Furthermore, Body Corporate salary increases are generally tied to CPI. If inflation continues to drop, salary increases may also diminish.
While higher property prices and interest rate periods have led some investors to exit the market, reducing letting pools, increased rents during this period have kept letting income stable for most complexes.
Conclusion
Given the current market dynamics, selling your Management Rights business now could be advantageous. The combination of high property values and relatively low listing numbers presents a strong opportunity to achieve the best outcome before the market potentially shifts. Waiting for multipliers to rise might not compensate for potential declines in property values, potentially resulting in a lower return than if you act now.
By acting promptly, you can capitalize on the current favourable conditions and secure a favourable return on your investment.
It's time to stop focusing on the Multiplier you paid, and focus the potential cash in your bank.
