Financing your Management Rights Business

Published: 20 February 2015.

Obtaining finance in relation to the purchase of Management and Letting businesses can also be a specialised task. With the changing focus of the industry and relevant legislative guidelines, the attitude of financiers has also been one of continual change.

Issues requiring consideration in relation to finance include:

  • Ensuring you speak with an industry recognized Management Rights financier. There is one attached to most of the major banks
  • Ensuring you get finance
  • Structuring your finance package to achieve maximum tax advantage and minimum impact on initial cash flow
  • Establishing a sound ongoing relationship with your financier.

How Much Can I Lend?

Management Rights as a business are viewed quite favorable by most financial institutions. The amount of money they will lend is based on the security you can provide through tangible assets and your ability to repay the loan.

In the case of management rights the tangible assets are in two parts:

  • The valuation of the business
  • The value of the freehold property component.

Lending ratios vary depending on the size and location property but as a general rule the financial institutions are generally prepared to lending 80% against the property component and 60% against the business, this is usually 70% of the overall asking price. You would need to discuss with your financial institution your borrowing capacity prior to searching for property so that you know exactly where you stand.

Aquisition Expenses

Costs involved in buying Management Rights generally will total 5% of the asking price. This includes:

  • Stamp Duty
  • Legal Fees
  • Accountant fees
  • Restricted Real Estate Licence Fees
  • Insurance – Liability & Indemnity

My Shortlist

All properties you've shortlisted of interest.