Hi All,

After coming across this site, I have been reading through the posts on the forum and finding them very informative. I am now seeking some information from the very knowledgeable among you. Please excuse me if some of my questions/thoughts are a little green….the whole idea of buying a business and being self-employed is all new to me, and becoming a fast and very interesting learning curve.

My wife and I have just started looking into the possibility of purchasing a motel, either leasehold or freehold. We really like the idea of getting into a business and working for ourselves, and the idea of a motel appeals to us. Having been a Sales Rep on the road for many years, I have seen my share of motels, and would like to think I have picked up a few things along the way as to the good and not so good operators out there – knowledge and ideas that we hope we can bring with us into the business.

Firstly, Freehold vs Leasehold – pros and cons? I'm thinking if we can purchase a smaller, cheaper freehold property we would be better off long term. At this stage, we are not thinking of getting into and out of a motel within a short period of time – looking at 8-10 year minimum.  With two young boys we are not keen to move them around too much with schooling.

Before we can consider anything further, we will need to look into our borrowing capacity (as I said we have just started looking into all this). We currently have around (conservatively) $160k equity in our family home. Ideally we would like to keep this as a rental property (rent would more than cover current mortgage repayments). In saying this, we know that it severely (if not completely) limits our borrowing. We are quite prepared to sell our home to purchase a business.

Can anyone advise basic figures of borrowing capacity for both leasehold and freehold if we were to sell up, and have around $140k cash to put in?

If we were to purchase Freehold, can I use money from my current Superannuation pool to buy into the motel? Could this be set up as part of a SMSF? Considering the fact that a freehold would enable us to sell off a lease in our retirement and have income from the rent.

I have received property summaries and some basic P&L statements from various brokers on various motels that I have enquired about during the start of my research. Looking into the P&L's is all new to me, having always been an employee with companies. Many of the motels figures show little, and in some cases negative, profit.  Would this be a case of very poor management, or great accounting? I have read on this forum where the business vs private use lines are somewhat "blurred" when it comes to operating costs. Is this enough to reflect so heavily on the final net profit numbers?

What are people’s opinions on older and/or mismanaged vs well run, successful properties? All the brokers seem to sell the "upside" to the properties that could be turned around. We are thinking along those lines, where we could, all going well, use our enthusiasm (or perhaps naiveness..lol) to reinvigorate a business.

I hope my post is not too long, and hoping some of you out there can answer or assist with some feedback or information on some or all of my questions.

Look forward to hearing anyone’s thoughts.

Kind Regards, Peter