Buying a Motel

Matthew Holland • 22 September 2023

If you're looking to buy a motel, you'll first need to decide if you want to purchase it as freehold or leasehold. This is an important decision that will have long-term implications for your investment. Freehold ownership grants you complete ownership and control over the property. You will have the freedom to make any changes or improvements as you see fit, and you will also have the potential to benefit from any increase in property value over time.


On the other hand, leasehold ownership means that you will own the property for a set period of time, usually between 10 and 25 years, but you will not have complete ownership or control. The property will still be subject to the terms of the lease agreement, which may restrict your ability to make changes or improvements. However, leasehold ownership can be a more affordable option, as the initial purchase price is typically lower. It is important to carefully consider all the factors and consult with legal and financial advisors before making your decision.


Ultimately, the choice between freehold and leasehold ownership will depend on your individual circumstances and investment goals.


Valuation Methods for Motels

The valuation of a motel is dependent on various factors such as whether it is freehold or leasehold. Determining the absolute valuation method can be challenging, but it is crucial to begin by identifying the type of motel ownership, be it freehold or leasehold. Additionally, considerations need to be made regarding the location of the motel, the profitability, the average occupancy rate, the style and age of accommodation, and, if applicable, the length of the lease.

To delve further into the valuation process, prospective buyers typically aim for a return on capital ranging from 25% to 30%, focusing primarily on the operating side of the business. After evaluating the profitability and operational aspects, attention is then directed towards assessing the value of the land and building.

It is worth noting that each motel's valuation is unique and requires a comprehensive analysis of these aforementioned factors. By thoroughly examining the specific details of the motel, a more accurate and informed valuation can be obtained, enabling buyers to make sound investment decisions.


If you'd like help buying or selling a motel contact Matt Holland on 0425 223629


www.allbizdealroom.com.au

www.allbizcapital.com.au

https://www.linkedin.com/in/matthew-holland-amg/


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