SE Queensland Rent Roll Market Wrap
2013 has seen a significant turn around in the rent roll and agency sale market.
Rent roll values in some areas have seen a strong return in value and enquiry for real estate agencies has also rebounded. After the 2010 – 2011 downward spiral in the real estate market, those that survived have understood the value of their Property Management portfolio in providing a consistent budget-able income which allowed them to pay rent and wages.
Off the back of that, 2012 saw more interest in rent rolls providing the momentum for what we are seeing today, especially on the Brisbane Northside, Inner City and Gold Coast.
Brisbane Northside rent roll multipliers are now above their previous peak. These recent sales confirm this:-
Arana Hills $2.95 per $1
Bald Hills $2.85 per $1
Albany Creek $3.05 per $1
New Farm $3 per $1
Other sales currently under contract or under offer also provide significant indication of the strength of the market.
The Gold Coast has rebounded well after multipliers in recent times hovered down around $2 per $1. All Gold Coast rent rolls we have had over the past 2 years have sold quickly and we are very keen for more rent rolls to sell in the region. Prices vary considerably on the Gold Coast, call us if you would like more information.
Logan region has been slower to rebound as has the Sunshine Coast and Ipswich. Clearly they are not far from seeing the same or similar improvement and purchasing in these areas now would appear to make very good business sense.
If you have any questions or would like to talk confidentially about the Rent Roll market please contact Kevin Hockey on 0413 879 986 or email kevin@reas.com.au
A Quality Rent Roll Defined
With a lot of activity at the moment regarding Principal’s expanding, selling or merging, rent rolls and their value is a hot topic for discussion.
Understanding the value of your business provides you the opportunity to take advantage of the current market and expand your Business operations and Property Management Division through the acquisition of other rent rolls. Banks will loan to you on the basis of your rent rolls value, talk to your bank manager regarding conditions which apply.
If you are considering selling your rent roll, understanding the mechanics of its value allows you to ensure a Premium price is achieved. Talk with Kevin Hockey today about how you canmaximise your sale price.
A Quality Rent Roll defined. Read more
Is GST applicable in the sale of a Rent Roll
There is much variance, disagreement and confusion amongst advisors to real estate Principals regarding the application of GST upon the sale of a rent roll. This “variance” comes down to one particular point in relation to the sale…….but more on that shortly.
So who wants to pay more Tax?
Nobody put this question into better perspective than Kerry Packer who in 1991 was facing a federal investigation into the print media industry where he was asked whether he tried to legally cut the amount of tax he paid. His reply, as only Mr Packer could, “If anybody in this country doesn’t minimise their tax, they want their heads read, because as a government, I can tell you, you’re not spending it that well that we should be donating extra,”
None of us want to pay more Tax than we have to and even in this circumstance where the GST is likely to eventually be “refunded” in due course it isn’t an ideal cashflow position. Last week I spoke with the ATO for a ruling on its position regarding GST and real estate rent roll sales after accountants conflicted in their advice to the buyer and seller of a sale. Their response was to direct me to a website which covers the rulings of GST.
Firstly I was referred to http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20025/NAT/ATO/00001 and attention diverted to Paragraph’s 94 & 95 which reads:
94. DeliCo conducts a delicatessen business from leased premises adjacent to a large grocery retailer within a suburban shopping mall. DeliCo negotiates the sale of the business to another registered entity, NewCo, which has its own premises from which it intends to operate the delicatessen. The contract provides that the business name, plant and equipment, stock and goodwill are to be supplied to NewCo. DeliCo retains its premises and intends to commence another business from these premises.
95. Because the delicatessen is conducted from premises within the mall, some premises are necessary for the conduct of the delicatessen business. The supply is not the ‘supply of a going concern’ as DeliCo is not supplying premises which are one of the things that is necessary for the continued operation of the supplier’s enterprise.
The matter of an ongoing concern, I was told by the ATO, is generally defined by the need for the seller to supply the materials necessary to continue the business. This, he said, would be the requirement to provide the equipment necessary eg Fax machine, software etc and most importantly the premises in which the business was conducted. The first website above discusses this by saying it is necessary to supply premises to be considered the “supply of an ongoing concern”.
Further research took me to this website:- http://www.ato.gov.au/businesses/content.asp?doc=/content/19995.htm&page=1#P450_36547
14.13 Rent Roll
14.13.1 Is the sale of an agent’s rent roll subject to GST?
ATO Position – Yes, if the agent selling the rent roll is registered or required to be registered for GST. (If the rent roll is sold as part of the sale of the agent’s property management business, it may be GST-free as a supply of a going concern. For more information about GST-free supplies of going concerns, see GSTR 2002/5
So finally, if you buy a rent roll and relocate it to your own business at different premises, it is not considered an ongoing concern and therefore is subject to GST.
Should you purchase the rent roll and decide to operate it from the same location, it is very likely to be GST free and considered to be a sale of an ongoing concern.
The GST on the eventual sale, from the ATO’s perspective, is the responsibility of the seller. Should GST not be applied to the sale and the ATO at a future point were to decide GST is to be attributed to the sale, the seller will be expected to pay the outstanding GST.
As Kerry Packer said, don’t pay any extra than you have to, however, the Tax office is known to wield a big stick when it comes to not paying what it deems as being due.
Real Estate Agency Sales specialises solely in the sale of Real Estate Agencies and Rent Rolls, that’s all we do. Contact us on 3266 4242 or kevin@reas.com.au.
Borrowing against your Rent Roll
This is the year of opportunity – for those willing to grasp it. American Entrepreneur Warren Buffet said, Be fearful when others are greedy, and be greedy when others are fearful. Seems like the world is pretty fearful, so is this our chance to be greedy?
To take advantage of the potential opportunities which may arise for you and your business, you may need help funding your progress. This is where your rent roll once again becomes such an invaluable ally to your business. Apart from generating income, assisting in increasing market share, building your database and providing listing leads to your sales department, you may also borrow against your rent roll secured solely against your portfolio.
Like a snowball racing down a hill gathering enormous momentum and strength, this amazing asset called Property Management can self stimulate the growth of your business, if you allow it!
Managing your Property Management business
A decade ago Property Management was perceived as the very poor cousin to Sales within a real estate agency however in 2010 the enormous increases in returns, cashflow and value demand we as Principals are far more professional in our approach to this part of our business.
A rental department provides enormous long term benefit to your business.
- Business energy and momentum
- Branding
- Equity
- Sales leads
- Cashflow
To achieve maximum benefit you as the principal must set the standards, monitor performance and create accountability within your Property Management business.
