The core reason to enter a Management Rights’ partnership is it provides the ability to purchase a significantly larger business. The larger the business, the greater the return as more equity is built more quickly. The greater the number of units in a complex increases the income levels disproportionately. Partnerships are generally formed for larger properties providing a net income of $250K or more.
MR Finance specialises in facilitating partnerships where one partner is the active/working manager and the other partner is a silent investor/group of investors. Historically, a silent and working partnership team is more likely to succeed than partnerships where there are two working partners. However a two working partnership team can work successfully with workload and time commitment sharing advantages. A partnership does not require equal investment with it possible for silent or working partners to invest as little as 5% or $100,000.
When entering a partnership an agreement is likely to include a stability clause for two or three years so the investor is guaranteed a reasonable term, increasing the likelihood of investment success. At the end of the stability clause term, a partner may have a right-to-purchase the other share of the business. However, this rarely occurs, partnerships usually dissolve when capital gain peaks and it suits both parties to sell.
Additionally, partnerships are also protected by the Manager’s employment contract. With the Manager as an employee they may have the employment terminated for not carrying out agreed duties.