- BobbsParticipant@bobbsJoin Date: 2011Post Count: 6
Sorry have been tied up elsewhere lately…
With Investment Motels, if a Motel refurbishment is not up to the standard required by the brand, who is responsible for spending the refurb money, the tenant or the landlord?
I had the impression that as it was in the tenants interest more for the business, it would be the tenant. Am i correct in assuming this
There are 2 considerations here, maintaining the star rating, and/or meeting the annual brand quality inspection requirements.
Star Rating – Most leases state that the tenant must maintain the star rating at the tenant’s expense.
Brand – The lease will show who is responsible for replacing or maintaining those items which are not up to brand standard. Usually the business is considered to be the tenant’s business so the tenant decides what brand to use, but some leases insist on maintaining a particular brand or prevent changing a brand without mutual consent of the tenant and landlord.
Because the tenant is usually the one who pays for refurbishment of interiors and visible fittings, then usually the tenant pays.
But a “refurbishment” may require resurfacing the carpark or driveway, replacing the fence, rendering, new signage, new gardens, guttering or tiles, etc which are bigger capital items and may be the landlord’s expense, again depending on what the lease says.
That document is king, almost.
thecrestkindrenMember@kindrenJoin Date: 2011Post Count: 6
Hi all, have been following the forum for some time, great stuff, I feel we are getting closer to a purchase. Can anyone comment on Goulburn as a motel town and growth in Goulburn.
Also any thoughts on Lithgow, both obviously attract a different clientele
Hope your target is lucrative for you.
My Opinion. Goulburn is a great motel town. It even provides well for motels of lower star ratings.
One motel has just been knocked out of commission by being converted into a half way house.
Recent sales should provide plenty of info for a valuer.
Lilac City is for sale. Also Goulburn Motor Inn. Trappers just sold.
Business comes from many different sources in Goulburn, like Police Academy, tradies, Wakefield car racetrack, reps, tourists, hume hwy traffic never stops. Provide quality and value for money and a motel business will grow there. Must be effective on the net though.
Being a town of weather extremes, effective efficient heating & cooling and insulation are essential. Distance to food is important coz you can freeze on the street in 100 metres (speaking from bitter experience). There are 2 good motel opportunities there, so PM me if you like.
Lithgow motels should make good money, thrive on the coal & power stations. Council website includes an excellent S.W.O.T. analysis even specialising in hospitality & tourism too, worth reading. Zig Zag & Bowen dominate, both excellent. One near prison always busy, needs reno. Lose a chef though, could be waiting a while to find a replacement in Lithgow. Also a town of weather extremes. Tradies bookout most everything Mon-Fri. Weekends sparse. Expect it to go up and down hitched to the fortunes of the power & coal industry. Opportunity exists to buy or renovate nearby properties for extra overflow accomm. ” Proposed ” superhighway won’t affect a good motel there unless it’s mostly dependent on passing trade, none are.
Both the above towns have some tired motels and some great ones.
PM me a lease or the listing with specifics if you want more info.
All the above is opinion only.
thecrestbonsiaParticipant@bonsiaJoin Date: 2011Post Count: 1
New to the site.All good advice.Thinking of a lease hold motel between Tammworth and Tenterfeild on the new england Hwy.Just my wife and I and 1 employee for office and cleaning.We have been managing motels and resorts in a large coastal holiday area for 12 years now and are looking for a quiet life compared to now.Is the new england a good area for returns? Would be able to do most repairs ourself apart from electrical
Haven’t assessed the NE area for some time now. Outdated info won’t help.
Graph and compare the towns occupancy rates and rev per room from ABS stats.
Check the traffic counts on the main 4 towns allowing also for east west which Armidale doesn’t get.
Which ones are bypassed or will be soon ?
Restaurant or not?
Tamworth and Glen Innes are well regarded.
The others share the same north south hwy so it’ll depend on the merits of what’s for sale.
Obviously net effectiveness is a big factor, but if traffic count is low then the numbers are not going on that road,
or not going to that town or local area, then
they don’t want to see a local website.
It’ll help to get a clear picture of what you want, and be certain of how much you can spend
according to the Bank, and allowing for stamp duty and legals :
town facilities ( golf, other sports, medical, infrastructure like airport, rail, communications, ).
You probably know all this already but just clarifying your search criteria saves time and
makes you analyse your needs and wants which helps for a better outcome.
What price bracket is of interest and what does your wishlist look like ?
Info shared helps others learn on the forum.
Suggest you add an email address to your profile so you can get private messages on or through the forum.
Happy to help if you have more info.
Yay – We finally have the purchase of a motel leasehold under contract, hope to settle and move in about 2 weeks.
Banks were less than helpful even through brokers. NAB gets the wooden spoon, CBA was excellent.
In a few days we’ll post more detailed info here to assist other motel investors.
A quick update.
We bought a leasehold in Wagga Wagga, NSW on 26% ROI.
Settlement due end of Nov.
Excellent condition, strong business, hence the lower ROI.
To speak in positive terms, during this process we have experienced
enlightening and rewarding challenges in the many areas relating to the purchase of a motel and business :
finance, solicitors, business brokers, finance brokers, banks, contracts, accountants, valuers, communications, DD, negotiations, motel chains, suppliers, council, zoning . . . .
To speak in clearer terms, it was frustrating and stressful mostly due to
one bank behaving so badly we may still decide to lodge a complaint to authorities,
and bungling brokers.
People in key positions with expertise who act quickly and professionally have been hard to find.
However we did find some along the way. It makes a huge difference to be surrounded by a good team.
For prospective purchasers we have some suggestions based on our experiences with the current market, and those who have questions, PM or post here, and we’ll do our best to assist.
When negotiating a deal or price, we try to ensure the deal and price is subject to enough conditions like satisfactory final inspection, item for sale meeting sale description after detailed inspection, valuation meeting price agreed, satisfactory pest inspection, finance under terms acceptable to buyer, expenses as disclosed, your solicitor and accountant being satisfied with all documents, full disclosure of all known faults, leaving conditions open for some unforseen factors, because there will probably be some.
Commercial finance is available as low as 7.5%, to our knowledge, but there may be better deals out there.
Finance costs increase with risk factors like business experience, collateral, LVR,.
The quality of the motel and business is a prime risk factor.
Valuation quotes ranged from $3K – $5K.
Murphy’s law is now operating, several excellent motels have finally just appeared on the market,
as soon as we committed all funds.
We try to be a careful investor, never a punter.
Hi Crest, reading today's AFR, motel in Katoomba sold this week – 37 suites @ $1.4M (the article didn't mention returns etc).
What’s the AFR ?
Katoomba is such a magic unique place.
But it sounds like the visitor numbers have been slow for a while, don’t know why
when it has so much to offer.
Depending on their condition and about 10 other vital factors, it could be a good deal.
The Australian Financial Review, just a little non-descipt newspaper
Also noted another sale indicating that prices being achieved have dropped 40-50% over the last 5-7 years. There are some big losses out there just waiting to be crystalised. That’ll put more pressure on rates & access to commercial funding.Scott No Mates wrote:The Australian Financial Review, just a little non-descipt newspaper
Also noted another sale indicating that prices being achieved have dropped 40-50% over the last 5-7 years. There are some big losses out there just waiting to be crystalised. That’ll put more pressure on rates & access to commercial funding.
Yeah thanks for the heads up on the obscure publication.
If that drop refers to Katoomba you may be right, it’s suffered as a destination plus many tired properties, didn’t want to give them any more bad “press” but we don’t have the resources to market a region, so we target strong trading turnkey operations in strong locations for the reliable immediate and ongoing cash flow. We find it’s easier.
You’re right about some bargains out there. Banks are still tight & choosy on motels.
This is what I mean about opportunities coming along after you hit the borrowing wall.
Here are 2 motels which just came onto the market , just when I’m out of funds to buy, and I wish I could buy both.
If anyone is interested in these, I’m happy to discuss and assist.
Hi Crest, here's the one which sold in Katoomba, http://www.realcommercial.com.au/property-hotel+leisure-nsw-katoomba-5826256
I can't remember the location of the other one which sold but it wasn't in the mountains, there was a whole article devoted to the topic.
Thanks for that info. I’m very interested in locating that article and will start searching.
The Echo Point location would have to be considered very strong in the tourism sector.
It’s an awsome view, well setup for buses and a “must see” . As I remember, it’s free too.
Great motel for someone with good maintenance skills and ripe for a reno.
We’ve been avoiding anything with a restaurant, so the one at Mudgee next to the RSL is perfect, and the
other one is in Bathurst and although it has a restaurant, it’s across the road from a hotel/motel with 2 restaurants so for that location we’d make an exception. But banks LVR’s are so harsh with motel purchase that we ran out of deposit funds after we committed to the Wagga purchase. Then these plums pop up, ggrrrr.
It was a small article in the afr earlier this week in the property section. You may still be able to get a copy from the newsagent or online subscription.
We are pleased to announce finally after many hiccups over the last 18 months of searching
for the right motel, , that we have
settled and purchased the leasehold of :
The Best Western Ambassador Motor Inn, Wagga Wagga NSW.
4 star, 22 rooms plus 6 x 2 brm apartments, pool, no restaurant,
strong business, excellent location, very strong motel town.
Still happy to help anyone else with motel investment, but
time a bit more limited while operating this motor inn.
Finance was crucial, nearly stopped us,
and then we found finance ourselves through a
creative process with CBA.
Steep learning curve, to another level I guess.
Our thanks to all those who helped and encouraged us to
persevere through a difficult process.
Family and friends are priceless.
The next 6 months operating the business ourselves will prove the figures
beyond doubt. Looking forward to that point in time.
Hope you all enjoyed a happy Xmas and
we wish you a very successful 2012.
Over the last 2 years we have had some educational experiences with banks who financed our motel investment, and in the hope it might help someone else, we’ll share it here.
Bank A – agreed to finance our plan to sell our freehold motel, buy a leasehold motel and double the return for the same investment.
Then use the extra income to buy 1-2 brm units nearby to fill through the motel as serviced apartments.
As soon as we sold the freehold motel, the bank said “oh sorry we don’t finance leasehold motels unless you hold some freehold property” – . . . . . we asked ” um doh , do you mean like the freehold property we just sold ?”
Gotta love that one. Sgt George .
Bank B. Then we found another bank to finance the same plan, reached agreement, but as soon as we wanted to go ahead, they moved the LVR into an impossible position for us thereby killing the deal. They wanted a massive deposit. Then they asked us if we’d like to borrow $XYZ and we said sure, that’s heaps more than we’d asked for, then they refused it a week later but during that week they recorded it as a credit enquiry by us for the extra huge amount on our credit record, for all to see, and then told us that due to circumstances of over a month ago that amount could not have been lent anyway.
Gotta love that one too. NAB.
We decided to try all the finance brokers we knew, but none could find finance for us.
Bank C. Then as a last resort, we decided to ask the vendor’s bank, on the assumption that the vendor’s bank had been enjoying the direct cashflow income of the motel business for a number of years and should be confident of the figures from the vendor. After all, if the vendor’s bank had refused to finance it, we would’ve had good reason to doubt the vendor’s figures and walk away. The bank agreed to finance it provided we reduced the LVR a little over the first 12 months, and then on IO for 5 years. They agreed that their firsthand knowledge of the property and business made it possible. Very competitive interest rate, great service, friendly helpful.
Thank you CBA.
In this case, the journey was educational but lousy, but the outcome excellent.
Posted in case it helps someone get a deal across the line.
thecrestthr1lledMember@thr1lledJoin Date: 2010Post Count: 5
Hi to thecrest, I've learnt such a lot from your wonderful posts, many thanks, and have a couple of questions not yet asked.
Our situation (as I know you're going to ask ) : We are looking to buy a leasehold motel in a strong country town, not coastal. We won't need finance as the one we are researching (which is in Victoria) is within our means.
Both the agent, who is familiar with this motel, and the current operator, have told us a lot of cash goes through the place (without actually saying it if you know what I mean) and I'm sure this goes on at many motels. How then can we rely on the P/L financials? Would it still be worthwhile getting an accountant to look them over, even though they aren't right? There's a big difference from one year to the other.
Secondly, do you have the steps involved in buying a leasehold motel documented? I guess I need to know a) the steps and b) what order they should be done in. As an example, at what stage do you get a solicitor on board – when making the offer, so that the conditions can be put in correctly, or after the offer is accepted, then have the conditions inserted into the contract?
Thirdly, we want to get an assessor to check the motel, for its value, and am having problems with this too. First I cannot find any – what are they called?) and second do they base their estimate of value on the P/L, as again, these are skewed.
If you can shed any light on these, we would be most grateful. Hope you are doing well with your motels.