Calculating the sale price
Calculating the sale price
Calculate the Sale Price
The sale price of a Management Rights complex is a combination of the value of the freehold component, ie: the managers apartment, office, storage, plus the value of the business. The business value is calculated by multiplying the net operating profit by the PE ratio (Price to Earnings ratio or commonly refered to as the 'multiplier').
As a guide the current PE ratios range from 3.5 to 5.5 with some exeptions for outstanding blue chip waterfront property. Items that determine the value of the PE ration are such as location, apartment configuration, style and date of the complex to name a few.
Management Rights represent good value buying when comparing PE ratios of stocks in the share market or other businesses (the sale of QANTAS is reporting a PE ratio close to 15).
