Motel Investment

Hi Bobbs
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.

Cheers
thecrest

Hi Kindren
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.

Cheers
thecrest

Hi Bonsia.
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 :
star rating
size
restaurant
pool
residence
condition
chain
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.
Cheers
thecrest

Hi All
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.
No restaurant.

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.

Cheers
thecrest

Hi Scott
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.
Cheers
thecrest

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.

Hi Scott.
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.

Cheers
thecrest

Anyone care to add to this post n let us all know what they’re seeking in a motel and share their story ?
The journey is always amazing.
Cheers
thecrest