Going Concern Valuation: What It Is and What a Lender Advances
Accommodation Finance
Going concern · Valuation basis · What a lender advances
Buying a motel, pub or park puts three numbers in play: the contract price, the going concern value and the amount a lender will actually advance. They are not the same number. The lender controls the valuation instruction, then applies its own policy to the property, business, goodwill, chattels and any finite right to trade.
Quick Answer
A going concern valuation values a trading motel, pub or park as an operating whole, not the real estate alone. On a purchase, lenders usually advance against the lower of the price and the valuation they accept, then apply their own policy to the property, business and goodwill.
Also called: freehold going concern valuation, accommodation business valuation, trading business valuation, motel going concern valuation.
Start from where you are in the deal
- You have not made an offer yetWork out what the asking price is made of, whether stock is separate, what records exist and whether the contract needs a valuation condition. Start with what the valuation can include.
- You have signed and the finance clause is runningConfirm the lender's valuation basis, the assets to be included and the seller records the valuer will receive before the instruction goes out. See what to do before the valuer is instructed.
- The seller is slow with financialsDo not treat this as an admin problem. The valuer cannot verify earnings it cannot see. Ask your solicitor whether the contract requires the seller to provide records and access, and use the accommodation purchase document pack.
- The valuation came in under the priceIdentify whether the gap is price, unverified earnings, an excluded asset or lender policy before choosing a remedy. Go to what a low valuation actually changes.
- The valuation is above the purchase priceA higher valuation does not usually let a purchaser borrow against the uplift immediately. See which number the loan uses.
- You already own it and want to refinanceThe original report is a dated snapshot, not a permanent borrowing limit. See what happens at refinance.
- You are buying a lease, management rights or a parkA right to trade with an end date changes both value and loan structure. See when the right to trade is finite.
- You only want the lending bandsThe indicative bands by asset type and location sit in accommodation lending by asset type and location.
How is a going concern valuation calculated for a motel, pub or park?
A going concern valuation is usually built from the sustainable earnings of the trading business, the market evidence used to convert those earnings into value, and the exact assets the valuer was instructed to include. For an income-producing motel, pub or park, the income approach commonly carries the most weight, but no Australian lending standard prescribes one compulsory method.
The important distinction is between what is being valued and how the valuer values it. A lender can instruct a freehold going concern, a property-only figure or a going concern with the property and business components split. Once that basis is agreed, the valuer chooses the approaches and inputs supported by the evidence.
How is a going concern valuation worked out?
The International Valuation Standards name three principal valuation approaches in IVS 103: the market approach, the income approach and the cost approach. A valuer can use one or more of them. API valuer members are required to comply with the IVS edition in force from 31 January 2025.
IVS 103 says the income approach should be applied and given significant weight where the income-producing ability of the asset is the critical element of value to buyers, which is the usual position for a trading motel or park. In Australian practice that is commonly done by capitalising future maintainable earnings or net operating profit: an earnings figure a buyer could expect the business to sustain, converted to a value. The market approach compares sales of similar businesses, and IVS 103 lists earnings multiples and EBITDA multiples among the units of comparison used in business valuation. The cost approach, which includes adding up separately valued parts, is typically used as a reasonableness check.
Where approaches point to materially different values, IVS 103 says the valuer should work out why and reconcile them, not simply average them. ANZVGP 111 likewise expects the report to set out the methodology for each approach and a reconciliation. That is the part of a report to read most carefully.
Source: International Valuation Standards Council, IVS 103 Valuation Approaches, paras 10.01, 10.07, 10.09, 30.02 and Appendix A10.04, in the edition effective 31 January 2025 published by the Australian Property Institute, read at source 23 September 2026.What are future maintainable earnings?
Future maintainable earnings are the level of earnings a buyer could reasonably expect the business to sustain after normalising the trading history. The valuer starts with actual records, then considers adjustments for items that are non-recurring, owner-specific or unlikely to continue under new ownership. The number is not simply the seller's adjusted profit, and no Australian standard publishes a universal list of accepted add-backs.
The practical test is whether the adjustment describes the business a buyer is actually acquiring and whether it can be proved. Australian valuation practice commonly treats genuine one-off costs, private expenses and owner remuneration adjustments differently from recurring costs that are necessary to produce the current revenue. One-off income can also be normalised out rather than added back. The stronger the documentary trail, the easier the adjustment is to test.
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| Adjustment being claimed | What the valuer is testing | Evidence that helps | Common problem |
|---|---|---|---|
| Owner or family labour | What the role actually involves and what an arm's-length replacement would cost. | Payroll history, role description, hours worked and market evidence for a replacement manager or employee. | Adding back all owner wages without allowing for the cost of replacing the work. |
| Private or owner-specific expenses | Whether the expense is genuinely personal and will disappear for a buyer. | Invoices, bank statements, BAS coding and a clear explanation of the item. | Calling a recurring business cost private because the seller would prefer it excluded. |
| One-off repairs or abnormal costs | Whether the expense is genuinely non-recurring rather than deferred maintenance or an ordinary cost of trade. | Invoices, maintenance history and evidence the underlying issue has been resolved. | Adding back costs that are likely to recur after settlement. |
| One-off income or temporary spikes | Whether the revenue can reasonably continue under the buyer. | Monthly trading data, source documents and an explanation of the event or temporary driver. | Treating a temporary grant, event spike or abnormal period as maintainable trade. |
| Occupancy, room rates, commissions and cleaning costs | Whether the operating assumptions reconcile to the actual trading records and current cost base. | Property-management reports, occupancy and rate history, invoices, payroll and reconciled accounts. | Using a headline revenue number without the operating costs or mix that produced it. |
That is why the source records matter. Where a property is valued as a going concern, ANZVGP 111 says the report should identify the source of the trading figures, annex a copy and show the adjustments the valuer made. What lenders expect from a motel seller is set out in the trading records a motel lender wants to see.
Source for the adjustment examples: current Australian valuation practice described by Oliver Group, EBITDA Add-Backs and Earnings Normalisation, published 1 July 2026. The table is practical guidance, not a prescribed API or APES list.Why do two valuers get different figures for the same motel?
Because no Australian standard sets the lending method, two competent valuers can reach different figures on the same trading history without either of them breaching a standard. The earnings figure, the capitalisation rate, the approach given most weight and the basis the lender instructed all involve judgement.
The earnings multipliers in agency material and trade commentary are market convention, usually reported by people with an interest in the sale. IVS 103 deals with them directly: rule-of-thumb benchmarks should not be given substantial weight unless it can be shown that buyers and sellers genuinely rely on them. So a multiplier is evidence a valuer can weigh, not a rule anyone must apply.
The useful questions are therefore not what the number should be. They are who was instructed, on what basis, what they were told to include and exclude, what trading figures they relied on, and what adjustments they made. All five are answerable from documents you can ask for. The vocabulary sits in the valuation glossary entry.
Source: International Valuation Standards Council, IVS 103 Valuation Approaches, Appendix A10.16, IVS effective 31 January 2025, read at source 23 September 2026.What does a going concern valuation include and exclude?
A freehold going concern can include the land and buildings, the trading business and goodwill, operating plant and equipment, licences and chattels. That does not mean every lender will take security over, or lend equally against, every component. Stock on hand is commonly outside the freehold going concern figure and should be identified separately in the transaction.
Are the furniture, fittings and licences in the lender's figure?
It depends on the instruction. ANZVGP 112 says that in Australia chattels are not normally included in a valuation of real property for mortgage and loan security purposes; if they are, that must be clear to the reader, and it would only follow a lender instruction. A freehold going concern, as valuers define it, normally does include plant, equipment and chattels. ANZVGP 111 asks the valuer to state clearly what has been included and what has been excluded, because the line between fixtures and chattels is often contentious. Read that list rather than assuming.
Licences need the same care, and they matter most on pubs. ANZVGP 111 says the valuer should note whether a licence, right or permit attaches to the land or is personal to the operator, that a separate charge may be needed if it is integral to value or the lender instructs it to be included, and that a mortgage valuation should state what would be needed to keep it if the lender took possession. Where intangible value sits in the same deal is set out in the goodwill glossary entry, and who actually funds it in who funds goodwill when you buy a business.
Source: Australian Property Institute, ANZVGP 112 section 7.0 and ANZVGP 111 sections 3.1, 4.5, 4.23, 5.2, 6.3 and 10.2, both effective 1 January 2025, read at source 23 September 2026.Is stock included in the going concern valuation?
Usually not in the freehold going concern definition used by the Australian Valuers Institute's hotel and motel methodology. That guideline describes the freehold going concern as land, buildings, operating plant and equipment, licences, goodwill and chattels, with stock on hand excluded. For a lending file, however, the actual scope of work controls, so read the lender's instruction and the report's inclusions rather than assuming the sale contract and valuation use the same bundle.
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| Item | How it is usually treated | What decides it | What the borrower should ask |
|---|---|---|---|
| Basis of value | Either the freehold going concern as a whole or the real property alone. ANZVGP 111 contemplates both. | The lender's instruction and the scope of work agreed in writing with the valuer. | Is the report on a going concern basis or property only, and will it split the figure into property and business. |
| Land and buildings | Always inside the figure, on either basis. | It does not change. It is the core of the security. | Which interest is being valued: a freehold, or a leasehold interest that ends on a date. |
| The trading business and goodwill | Inside a going concern figure, usually not shown separately unless a split is asked for. Outside a property-only figure. | The basis of value. On a going concern basis ANZVGP 111 requires the trading figures' source, a copy and any adjustments. | Can I see the trading figures relied on and the adjustments made, and does the lender lend against the business part. |
| Chattels, furniture and equipment | Excluded by default from a real property valuation for mortgage purposes in Australia; normally included in a freehold going concern. | The lender's instruction. ANZVGP 111 requires the valuer to state what is included and excluded. | Are the furniture, fittings and equipment the business trades on inside the figure, and are they covered by the lender's security. |
| Licences and permits | Noted in the report, with whether they attach to the land or to the operator. | ANZVGP 111 section 10.2: a separate charge may be needed if the licence is integral to value or the lender instructs it. | Does the licence transfer with the property, and will the lender need separate security over it. |
| A figure subject to a special assumption | Not produced unless a lender requests it. | A lender request. The report should then carry market value as is, the assumption, the value subject to it, and linking sales evidence. | What exactly is the special assumption, and what did the market value as is come to beside it. |
Is a going concern valuation the same as the GST going concern in the contract?
No. The GST supply of a going concern is a tax treatment. A going concern valuation is an opinion of value. A contract can qualify as a GST-free supply of a going concern and still be financed against a property-only figure, a split figure or a lender policy that gives different weight to the business component.
The ATO says the GST treatment depends on the seller supplying everything necessary for the business to keep operating, carrying it on until the day of sale, the buyer being registered or required to be registered for GST, the sale being for payment and the parties agreeing in writing that it is a going concern. Ask your accountant and solicitor to settle the GST clause before signing.
Source: Australian Taxation Office, Selling a going concern, read at source 23 September 2026. General information, not tax advice.What does the lender ask the valuer to value?
The lender decides the valuation question before the report is written. It can ask for the freehold going concern as a whole, the real property alone, a going concern figure split into property and business, or another clearly defined basis. The borrower can and should ask what the instruction says before the valuer starts.
Who decides the scope of the valuation?
Whatever its instruction says. Under IVS 101 the client and the valuer must agree the scope of work in writing, including exactly which assets are being valued, and in a lending valuation the client is the lender, not you. ANZVGP 111 adds that instructions should be confirmed in writing, including the purchase price and the selling agent, and that the scope should be clarified before the valuation starts.
By the time the report arrives, the question cannot be re-asked without a new instruction and usually another fee. ANZVGP 112 does allow one further framing: where a lender asks for a value subject to a special assumption, the report should include market value as is, details of the special assumption, the value subject to it, and supporting sales evidence linking both. Any material difference should be commented on and a qualifying statement included. That mechanism only happens if somebody asks for it.
What must a going concern valuation report show?
Where the property is valued as a going concern, ANZVGP 111 says the report should state the source of the trading figures, annex a copy of the figures supplied, and show any adjustments the valuer made to them. It should also set out the methodology for each approach used and how they were reconciled.
That gives a buyer something concrete to ask for. The annexed figures and adjustments are where a gap between the seller's earnings and the valuer's earnings becomes visible, line by line. ANZVGP 111 also says the valuer should consider the contract price against the other sales evidence and note it if the sale looks out of line with the market, so a low figure usually comes with reasons you can read.
Can you get a copy of the lender's valuation?
Sometimes you have a stronger right to the report than borrowers realise. Under the Australian Banking Association Banking Code of Practice, if you are a small business customer and a participating bank has received a valuation of commercial or agricultural real property and you paid for it or reimbursed the bank for it, the bank will provide you with a copy of the valuation and the related valuer instruction, except where enforcement proceedings have commenced. The bank can require you to accept reasonable limits on how you use the report.
That Code position does not mean every lender, every non-bank or every business-only valuation has the same obligation. Where the Code does not apply, the lender is still the client for the lending report and release depends on the report terms and lender policy. If you are given only a summary, ask for the figure, the basis of value, any split between property and business, the key assumptions and the adjustments to the trading figures. Those are the parts that change the finance outcome.
Source: Australian Banking Association, Banking Code of Practice, small business lending provisions on external property valuers and copies of commercial or agricultural real-property valuations, read 23 September 2026. Applies only to banks that subscribe to the Code.Can the valuation be reassigned to another lender?
Sometimes, but do not assume the PDF can simply be forwarded to the next lender. The Australian Property Institute's guidance on assigning valuations says reassignment occurs when a new client instructs the valuer and the valuer reuses the earlier inspection and information to prepare a report for that new client. The API says, as a general rule, assignment should not be undertaken without the valuer assessing the contractual, purpose, conflict, risk and professional-indemnity issues.
In practice the incoming lender must first be willing to accept the valuer and the existing scope, and the valuer must be willing to extend or reissue reliance. If the new lender needs a different basis of value, the report is stale, the valuer is not on the lender's panel, or the original engagement prevents reassignment, a fresh instruction may be required. If there is any chance you will change lenders, ask about reassignment before the first report is ordered rather than after the finance deadline is already running.
Source: Australian Property Institute, Member Alert: Assigning Valuations, effective 20 March 2019. Reassignment is a fresh professional reliance decision, not automatic portability of an existing PDF.Does ANZVGP 112 mention going concern or goodwill?
No. Checked on 23 September 2026, ANZVGP 112, the mortgage and loan security paper, contains no occurrence of going concern, trading business, business value or goodwill. That does not stop a mortgage valuation being a going concern valuation: the procedures paper ANZVGP 111 and IVS 200 cover that. What it means is that the mortgage paper itself gives no guidance on how much of a trading figure a lender should rely on. That is left to each lender's policy.
The practical consequence is that the question is never whether the rules allow a going concern valuation. It is what this lender instructed, and how this lender reads the business part. The bricks side of that comparison is worked through in how a lender reads a motel freehold on bricks, and the security treatment of specialised assets in specialised security and what the valuation tests.
Does the lender use the purchase price, going concern value or property value?
In our experience, on a purchase lenders commonly calculate the recognised value against the lower of the contract price and the valuation they accept, then apply their own gearing and security policy to the components inside that valuation. A higher valuation therefore does not normally create an immediate purchase-day equity uplift, while a lower valuation can increase the cash you need.
On a trading accommodation asset there may also be more than one valuation number in the same report: the total going concern, the freehold or property component, and the business, goodwill or chattel component. The total matters, but so does what survives as security if the trade stops.
Which figure does the loan follow?
The lender follows the valuation basis it instructed and the value it recognises under its credit policy. The lender may then lend more conservatively against goodwill, business value, chattels or a finite lease than against the freehold real estate.
This is why two lenders can receive the same valuation and offer different loan amounts without either valuation being wrong. The valuation establishes the evidence; the lender's policy determines how that evidence becomes an advance. The indicative bands by asset type and location are kept separately in accommodation lending by asset type and location.
What if the valuation is higher than the purchase price?
Do not assume you can borrow against the higher figure at settlement. On purchase files, lenders commonly recognise the lower of price and accepted valuation for gearing, subject to their own policy. The higher valuation can still be useful evidence of value, but it is not the same thing as cash equity the lender will let you draw immediately.
What is the gap between the price and the lender's advance made of?
Up to four things: price above the assessed going concern value, earnings the seller presents but the valuer cannot verify from records, parts of the asset outside the instruction (the business on a property-only report, or chattels and licences not brought in), and a business component the lender values but will not lend much against. Each is a different problem with a different remedy, and treating the gap as one undifferentiated shortfall is what turns a solvable file into a dead one. The remedies are set out in the low-valuation section.
What survives if trading stops?
If the business stops trading, the lender is left holding the real property and any chattels and licences under properly taken security, not the going concern figure. That is the question a credit assessor is actually asking, and it is why lenders care about the split as much as the total.
The less of the total that sits in the property, the more the lender's position depends on the business continuing, and the more conservatively the file is read. That is also why a specialised trading asset and a generic commercial building with a lease on it are treated differently even where the assessed figures are similar. The lending detail for each asset type sits on the motel finance page and the pub and hotel finance page.
Why do accommodation deals get declined?
In our experience declines cluster around five things: earnings that cannot be traced back to records, a valuation basis that was never agreed so the report answers a question nobody wanted, a right to trade that is shorter than the debt, chattels or licences everyone assumed were in the security and are not, and a cash position built on the going concern figure being lent against in full, with nothing in reserve if the lender weights it towards the property.
From our broking, indicative
What we see on accommodation files we have placed, as at September 2026. Qualitative only, because the figures that circulate on this topic are the ones this page is deliberately not repeating.
- What arrives with a valuation instruction is usually the contract, the trading history and the lender's standard scope. What often does not arrive, unless somebody puts it there, is a clear statement of the basis of value and whether the figure is to be split into property and business.
- The same trading history, given to different credit desks, produces materially different answers. That does not mean one of them is wrong. No standard sets the method or how much of the business part to lend against, so each lender's own policy fills the space.
- The most common reason we see a valuation re-instructed on an accommodation file is a scope question settled after the report rather than before it, most often about the basis of value or what was included in the figure.
- The contract clock, the valuation and the finance condition rarely move at the same speed. On a trading asset the valuation is usually the slowest of the three, because the valuer needs the trading records before they can begin. The sequence is set out in the next section.
Indicative only, based on accommodation files Switchboard has placed, as at September 2026. This is not a quote, not an offer, and not an indication of approval. Actual outcomes depend on lender policy, the valuation and your circumstances at the time of application. Not financial advice.
What should you do before the valuer is instructed?
Settle the valuation basis, the inclusions and the seller-record pathway before the instruction goes out. The cheapest time to fix a scope problem is before the valuer starts; after the report lands, changing the question can mean another instruction, another fee and less time under the finance condition.
The order it usually runs in
- Before the offer. Ask the agent what the price is made of: the property, the furniture, fittings and equipment, licences and goodwill. Ask for the seller's accounts and the BAS that reconcile to them. Ask your solicitor whether the finance condition allows enough time for a trading valuation, and whether a separate valuation condition is worth negotiating.
- Contract signed. The lender instructs a valuer, usually from its own panel. This is the moment to raise the basis of value and what should be inside the figure, because it is the last cheap moment to do it.
- The valuer asks for trading records. Expect profit and loss statements, occupancy and room rate records, the chattels list, licence details, and the lease or management agreement if the business is not freehold. On a purchase these come from the seller, so ask your solicitor whether the contract obliges the seller to provide them and to give the valuer access.
- The report goes to the lender. It is addressed to the lender, not to you, and the lender reads it against its own policy. You may see a summary rather than the full report, so ask specifically for the basis of value, the split and the valuer's adjustments to the trading figures.
- An offer, or a gap. If the advance falls short of what you planned, identify which part of the gap it is before choosing a remedy, using the table below.
Timing varies by lender, valuer, location and how quickly records arrive. Nothing here is a guaranteed timeframe.
What should you ask the lender or broker before the valuation is ordered?
- What basis is being instructed? Freehold going concern, property only, leasehold business, or a split figure.
- What will be included? Ask specifically about goodwill, chattels, licences, the manager's residence, stock and any operating rights.
- Will the report split property and business? The split can matter more to the loan than the total figure.
- What records must the seller provide? Get the request to the agent and solicitor while the finance condition still has time to run.
- What is the valuation fee and who pays it? The borrower commonly pays even though the lender instructs the valuer.
- What happens if the basis is wrong? Ask whether a re-instruction means a new fee and whether it can be completed before the finance deadline.
What if the seller will not provide the trading records?
Treat that as a transaction issue, not a paperwork delay. If the valuer cannot verify the earnings behind the price, the assessed earnings can fall or the report can stall. Most of the records belong to the seller, so ask your solicitor whether the contract requires the seller to provide the financials, chattels list, licence information and access the valuer needs. The wider evidence sequence is in the accommodation acquisition document pack.
What happens if the valuation comes in under the contract price?
A low valuation can reduce the amount the lender is prepared to advance and increase the cash, supporting security or other funding needed to settle. Before deciding what to do, identify why the gap exists: the price may be above assessed value, the earnings may not be verified, assets may sit outside the valuation instruction, or the lender may not advance much against the business component.
Does a finance clause protect you if the valuation comes in low?
Usually not on its own. A finance condition generally makes the contract depend on loan approval, not on the lender agreeing with the price. A lender can approve a smaller loan based on its valuation, and the buyer can still be bound to complete and fund the difference. The protection, where a seller will agree to it, is a separately drafted valuation condition negotiated before signing, with the threshold, deadline and notice steps spelled out.
How this plays out depends on the state, the contract form and the exact wording, and commercial and business sale contracts differ from residential ones. Have your solicitor read the finance and valuation conditions before you sign, not after the report lands.
Source: Pearson Chambers Conveyancing, Subject to Finance Won't Cover a Low Bank Valuation, 30 June 2026, read 23 September 2026. Written for Victorian residential contracts; general information, not legal advice.What can you do if the valuation comes in under the price?
First work out which part of the gap you are looking at, because each has a different fix. A valuation of a different thing is not the same problem as a lower view of the same thing.
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| Part of the gap | How to recognise it | What usually moves it |
|---|---|---|
| Price above the assessed value | The report is on the basis you expected, but the figure is below the price and the valuer comments that the sale looks out of line with the evidence. | A renegotiated price, more cash, or a valuation review where closer comparable sales exist. |
| Unverified earnings | The valuer's earnings figure is lower than the seller's, and the adjustments annexed to the report show add-backs removed or reduced. | Better records from the seller, reconciled to BAS, supplied while the report can still be revisited. |
| Parts outside the instruction | The report is property only, or leaves out chattels or licences the price assumed were included. | A conversation with the lender about the basis of value, and possibly a re-instruction, which takes time and usually another fee. |
| A business part the lender will not fully lend against | The report values the going concern at or near the price, but the advance is sized mainly off the freehold part. | Usually cash, a lender whose policy treats the business part differently, or vendor finance for the business part. |
If the time left on the finance condition is short, raise it with your solicitor early rather than waiting for the report. The mechanics of a shortfall at settlement are set out in what to do when a valuation comes in under the contract price, and how a seller can carry part of the price in how vendor finance works.
Can you challenge a low going concern valuation?
You can ask the lender to review it, but a review is strongest when it points to a factual error or supplies better evidence, not simply because the number is inconvenient. Useful review material can include missing comparable sales, corrected trading records, a documented add-back the valuer did not receive, or proof that an asset, licence or operating right was wrongly excluded from the instructed scope.
The lender controls the report and the review process, so there is no guarantee the figure will change. If the problem is that the report valued the wrong thing, that is a scope problem and may require a re-instruction rather than a valuation challenge. The settlement mechanics are covered in what to do when a valuation comes in under the contract price.
What happens when the right to trade runs out before the loan does?
Where the income depends on a lease, licence, management agreement or other right with an end date, the facility has to be structured around the usable life of that right. A strong going concern value does not remove the problem if the borrower cannot keep trading for as long as the debt needs to run.
Tenure is covered in full elsewhere: the comparison of freehold going concern against leasehold is in freehold going concern against leasehold, and it is mapped by lender in the freehold and leasehold accommodation finance map. This section covers only how a finite right to trade changes what the valuation figure describes, and therefore what the loan can be shaped around.
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| Factor | What it does | Why the lender cares |
|---|---|---|
| Fixed end date before the debt would otherwise be repaid | Shortens the usable term. | The income-producing right can end while debt is still outstanding. |
| Extension option the buyer can exercise alone | Can lengthen the usable term. | The borrower has more contractual runway without relying on another party's discretion. |
| Renewal or transfer needs landlord, body corporate or regulator consent | Can shorten or delay the usable term. | The borrower cannot guarantee the income-producing right will continue or transfer. |
| Licence or management agreement personal to the current operator | Can materially reduce what transfers. | The income right may not survive a change of owner without a fresh approval or agreement. |
| Documented renewal history and clear transfer mechanics | Can improve the lender's read. | The continuation risk is easier to evidence and structure around. |
The practical test is simple to state. Take the unexpired term, subtract the period a lender will want clear at the end of it, and ask whether a loan that repays inside what is left is one the business can actually service. If it is, the finite right is a structuring question. If it is not, it is a pricing question, and it needed to be one before the offer went in.
Management rights sit in their own category, because the right to trade, the letting appointment and the manager's residence are three things with three different lives, and a lender reads them separately. How that reads on a file is covered in how a lender reads a management rights file. The term itself is defined in the leasehold glossary entry. For parks, where a mix of tenures often sits inside one title, the lending detail is on the caravan park finance page.
What happens to the valuation after settlement or when you refinance?
The purchase valuation is a snapshot at a date, not a permanent borrowing entitlement. After settlement the business starts creating a new trading record under the buyer, and any later refinance, top-up or restructure can be assessed against the current trade, current security and the lender's current policy rather than the figure used on purchase day.
No Australian valuation standard sets a universal expiry date for a lending valuation. The usable age of a report is a lender policy question, and a lender can ask for an updated valuation where the report is old or the trading, property, lease, licence or market has changed materially.
What should you keep after settlement so the next valuation is easier?
- Monthly and annual profit and loss records that reconcile to BAS and tax returns.
- Occupancy, room-rate, site-mix or other operating data that explains the revenue rather than just the total.
- A running file of capital expenditure, refurbishments and material repairs.
- Current chattels and equipment schedules where those assets form part of the going concern.
- Renewed licences, permits, leases, management agreements and evidence of any transfer consents.
- A clean explanation of changes from the vendor's trade to the buyer's trade, especially where margins, staffing or room mix changed.
If part of the purchase price was carried by the seller or another short-term facility, the later refinance is not automatic. The new lender still has to be satisfied with the current earnings, current valuation and current security. The full process is in refinancing an accommodation business.
Which Australian standards govern a going concern valuation?
No single Australian lending standard tells a valuer exactly how to value a motel, pub or park as a going concern. The rules are split: Australian Property Institute papers govern real-property valuation procedure and mortgage reporting, International Valuation Standards govern valuation approaches and asset standards, APES 225 governs accountants providing valuation services, and lender policy decides how the resulting figure becomes an advance.
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| Standard | Who it binds | What it covers | What it leaves open |
|---|---|---|---|
| ANZVGP 111 Valuation Procedures, Real Property | Australian Property Institute valuer members valuing real property. Effective 1 January 2025. | Instructions and scope, report content, fixtures and chattels, and going concerns: where a property is valued as a going concern, the report should state the source of the trading figures, annex a copy and show any adjustments. | It prescribes no method for a going concern. It refers valuers to IVS 200 Businesses and Business Interests. |
| ANZVGP 112 Valuations for Mortgage and Loan Security Purposes | API valuer members valuing real property for mortgage and loan security purposes. Effective 1 January 2025. | Lender instructions, report content, as if complete valuations, special assumptions, exclusions from market value such as chattels, and disclaimers. | It never uses the words going concern, trading business, business value or goodwill. Those are handled by ANZVGP 111 and the international standards. |
| APES 225 Valuation Services | Members of the Australian professional accounting bodies who provide Valuation Services. Revised October 2024, effective for Valuation Services commencing on or after 1 January 2025. | The professional and ethical obligations attaching to a Valuation Service, the engagement types, and how the work is documented and reported. | It prescribes no method. In a Valuation Engagement the Member is free to use the approaches, methods and procedures a reasonable and informed third party would perform. |
| International Valuation Standards, including IVS 103, IVS 200 and IVS 400 | API valuer members, who are required to comply with the International Valuation Standards adopted by the API. Current edition published 31 January 2024, effective 31 January 2025. | IVS 103 names three valuation approaches: market, income and cost. IVS 200 covers businesses and business interests. IVS 400 covers real property interests. | There is no asset standard for trade-related property. Where an asset falls within more than one asset standard, the valuer should explain which were used (IVS 100, para 40.07), but no standard chooses them for a motel. |
| AVI Guidelines on Valuation Methodology for Hotels and Motels | Published by the Australian Valuers Institute for rating and taxation valuations, written around Victorian legislation. | Definitions of the parts of a freehold going concern, capitalisation methods, the trading records a valuer requests, and worked examples. | It is not written for mortgage or loan security valuations, and its example rates are stated to be illustrative, not market evidence. |
| APS 220 Credit Risk Management | Authorised deposit-taking institutions. APS 220 has applied since 1 January 2023. | Prudent credit risk policies, the acceptability of collateral, processes for valuing collateral before and during an exposure, and independence of the valuation from credit origination and approval. | It sets no valuation basis and no method, and the words going concern do not appear in it. What the lender asks the valuer for is the lender's own policy choice. |
Is there an API guidance paper for valuing a motel or hotel?
There is no dedicated one. As published on 23 September 2026, the Australian Property Institute's guidance paper set runs to ten papers behind twelve PDF links on one page, and none is addressed specifically to a motel, pub, caravan park or management rights business. There is no paper numbered 107 and none called Valuation of Accommodation Hotels, so a report, article or AI answer that cites one is citing something that is not in the current set.
The set does deal with going concerns in general. ANZVGP 111, the procedures paper for real property valuations, says that where a property is operating and valued as a going concern, the valuer considers the trading figures, and the report should state where they came from, annex a copy and show any adjustments. It refers valuers to IVS 200 for going concern valuations. So a lending valuation can be done on a going concern basis under the API's own rules; what the rules do not do is tell the valuer which method to use. Why lenders read specialised trading property cautiously is covered in why lenders lend less on specialised property.
Source: Australian Property Institute, ANZVGP 111 Valuation Procedures, Real Property, sections 4.23 and 9.0, effective 1 January 2025, read at source 23 September 2026.Is there any Australian guideline on valuing hotels and motels?
Yes, but not one written for loans. The Australian Valuers Institute publishes Guidelines on Valuation Methodology for Hotels and Motels, which are for rating and taxation valuations and are written around Victorian legislation. They are still the clearest published picture of how valuers break a trading accommodation asset into its parts.
The guideline describes a freehold going concern as the land, buildings, operating plant and equipment, licences, goodwill and chattels, with stock on hand excluded, and values it by capitalising net operating profit. It then separates the freehold interest (the property, valued by capitalising a rent) from the business interest (the plant, licences, goodwill and chattels), and calls the difference between the whole and the sum of the two parts marriage value. It also notes that a statutory rating valuation leaves the business and the chattels out. That split, property on one side and business on the other, is the same split a lender cares about, which is why it is worth knowing even though the guideline itself is not a lending rule.
Source: Australian Valuers Institute, Guidelines on Valuation Methodology for Hotels and Motels, read at source 23 September 2026. Rating and taxation guidance; its figures are stated to be examples only.Can an accountant value an accommodation business?
Yes. A business valuation by a member of an Australian accounting body is a Valuation Service under APES 225 Valuation Services, issued by the Accounting Professional and Ethical Standards Board and effective for Valuation Services commencing on or after 1 January 2025. Members in Australia must follow its mandatory requirements.
APES 225 is explicit about method, and what it is explicit about is freedom. In a Valuation Engagement the Member is free to use the approaches, methods and procedures that a reasonable and informed third party would perform. For a loan, though, the lender will generally rely on its own panel valuer, so an accountant's valuation is more often used for pricing, a dispute or tax than as the figure a loan is written against.
Every standard on this page, checked at source
- Going concerns are in the API rules, the method is not. ANZVGP 111 section 4.23 says that where a property operating as a going concern is valued on that basis, the report should state the source of the trading figures, annex a copy and show any adjustments. Section 9.0 refers going concern valuations to IVS 200. Sections 5.2 to 5.4 require the valuer to identify which fixtures and chattels are included or excluded, and section 10.2 deals with licences, rights and permits, including separate security where a licence is integral to value.Source: Australian Property Institute, ANZVGP 111 Valuation Procedures, Real Property, published 18 December 2024, effective 1 January 2025, read at source 23 September 2026. The paper cross-refers to IVS by earlier numbering; in the edition effective 31 January 2025 the valuation approaches sit in IVS 103.
- Ten papers, none dedicated to accommodation, no 107. The Australian Property Institute's published guidance paper set carries ten papers behind twelve PDF links on one page. None is addressed specifically to trading accommodation. There is no paper numbered 107 and no paper titled Valuation of Accommodation Hotels.Source: Australian Property Institute, Guidance Papers, api.org.au, read at source 23 September 2026. The page also carries the API's Privacy Policy and Whistleblower Policy, which account for the difference between ten papers and twelve PDF links.
- Four phrases, four zeros, in the mortgage paper. ANZVGP 112 Valuations for Mortgage and Loan Security Purposes, effective 1 January 2025, contains no occurrence of going concern, trading business, business value or goodwill. Going concern valuations are handled by ANZVGP 111 and IVS 200 instead.Source: Australian Property Institute, ANZVGP 112, read at source 23 September 2026 from the paper itself. A negative claim about a document, confirmed by searching the document rather than inferred from its headings.
- Chattels, and the one example. ANZVGP 112 section 7.0 states that in Australia chattels are not normally included in a valuation of real property for mortgage and loan security purposes, that inclusion must be clear to the reader, and that it would only be in response to lender instructions. The example the section gives is a serviced apartment in use subject to a management agreement.Source: Australian Property Institute, ANZVGP 112 section 7.0, Exclusions from Market Value, read at source 23 September 2026. Applies to Australia. The paper records a different position for New Zealand under PINZ.
- Special assumption, four limbs. ANZVGP 112 section 5.4 states that where a lender requests a value subject to a special assumption, the report should include market value as is, details of the special assumption, the value subject to the special assumption, and supporting sales evidence and analysis linking both assessments. Any material difference should be commented upon and a qualifying statement included.Source: Australian Property Institute, ANZVGP 112 section 5.4, Value Subject to a Special Assumption, read at source 23 September 2026.
- A hotel and motel methodology exists, for rating and tax. The Australian Valuers Institute's Guidelines on Valuation Methodology for Hotels and Motels are for rating and taxation valuations. They describe a freehold going concern as land, buildings, operating plant and equipment, licences, goodwill and chattels, excluding stock, value it by capitalising net operating profit, split it into a freehold interest and a business interest, and note that a statutory valuation excludes the business and chattels.Source: Australian Valuers Institute, Guidelines on Valuation Methodology for Hotels and Motels, read at source 23 September 2026. Written around Victorian legislation; its worked figures are stated to be examples, not market information.
- Free to choose the method. APES 225 Valuation Services, revised October 2024, is effective for Valuation Services commencing on or after 1 January 2025. Members in Australia must follow its mandatory requirements, and in a Valuation Engagement the Member is free to use the approaches, methods and procedures that a reasonable and informed third party would perform.Source: Accounting Professional and Ethical Standards Board, APES 225 Valuation Services, apesb.org.au, read at source 23 September 2026.
- Three approaches, and income leads on trading assets. IVS 103 names the market, income and cost approaches as the principal valuation approaches, and says the income approach should be applied and given significant weight where income-producing ability is the critical element of value. It also says rule-of-thumb benchmarks should not be given substantial weight unless buyers and sellers can be shown to rely on them.Source: International Valuation Standards Council, IVS 103 Valuation Approaches, paras 10.01 and 30.02 and Appendix A10.16, IVS effective 31 January 2025, as published by the API, read at source 23 September 2026.
- No trade-related property standard. The IVS asset standards are IVS 200 Businesses and Business Interests, 210 Intangible Assets, 220 Non-Financial Liabilities, 230 Inventory, 300 Plant, Equipment and Infrastructure, 400 Real Property Interests, 410 Development Property and 500 Financial Instruments. There is no trade-related property asset standard in the set. Where an asset falls within more than one, IVS 100 para 40.07 says the valuer should explain, justify and document which were used.Source: International Valuation Standards Council, IVS effective 31 January 2025, Foreword and IVS 100 para 40.07, read at source 23 September 2026.
- Mandatory, and current from 31 January 2025. API valuer members are required to comply with the International Valuation Standards adopted by the API. The current edition was published on 31 January 2024 and is effective from 31 January 2025.Source: Australian Property Institute, Standards, api.org.au, and International Valuation Standards Council, IVS 100 para 50.01, both read at source 23 September 2026.
- APRA sets process, not basis. APS 220 Credit Risk Management, which has applied since 1 January 2023, requires an ADI to have prudent credit risk policies covering the acceptability of collateral and appropriate processes for valuing that collateral, and to ensure all valuations are appraised independently from credit origination, assessment and approval. It contains no occurrence of going concern and names no basis of value.Source: Australian Prudential Regulation Authority, APS 220 Credit Risk Management, apra.gov.au, read at source 23 September 2026. APRA's letter of 13 February 2025 states that its requirements and guidance relevant to commercial property lending are contained in APS 220 and APG 220.
- The GST going concern is a different thing. The ATO treats a sale of a going concern as GST-free where the seller supplies everything needed for the business to keep operating and carries it on until the day of sale, the sale is for payment, the buyer is registered or required to be registered for GST, and the parties agree in writing. It does not treat a sale of property by itself as a going concern.Source: Australian Taxation Office, Selling a going concern, read at source 23 September 2026.
Four of the claims above are negative: they state that a document does not say something. Each was confirmed by reading the document itself on 23 September 2026, not a summary of it. Negative claims about a document set that is actively being reissued go stale, so this page carries a ninety day review interval rather than an evergreen one, and the API, AVI, IVS and guidance paper claims are re-checked at every review.
A trading accommodation purchase can involve several different numbers at once: the agreed price, the going concern value, the property component and the amount the lender will actually advance. The valuer answers the question the lender instructs, using evidence from the trading records and the relevant valuation standards. The lender then applies its own policy to that result. The lender may treat goodwill, chattels, licences and finite operating rights more conservatively than the freehold property. The buyer's best protection is therefore upstream: know what the price contains, get the seller records early, settle the valuation basis before the instruction, understand the contract's finance and valuation conditions, and calculate the cash position before assuming the headline valuation will be fully fundable.
Key takeaway: do not ask only “what is the going concern worth?” Ask what the lender is instructing, what is inside the figure, which value its policy will recognise, and what part of the price you must fund if those answers differ.Frequently asked questions
A going concern valuation assesses a trading business as an operating whole rather than valuing its land and buildings on their own. On an accommodation asset that means the property, the right to trade from it, the equipment the business runs on, its goodwill and its earnings history are considered together. A lending valuation can be done on this basis, and the API's procedures paper ANZVGP 111 sets out what the report must then show about the trading figures. It describes what is being valued, not a method.
IVS 103 names three principal valuation approaches: market, income and cost. For a trading motel or park the income approach usually carries the most weight, because IVS 103 says it should be given significant weight where income-producing ability is the critical element of value. In Australian practice that is commonly done by capitalising future maintainable earnings or net operating profit, with sales of comparable businesses as a cross-check. The valuer chooses the approach; no Australian lending standard requires one over another.
Not for lending. ANZVGP 112 governs valuations for mortgage and loan security and does not mention trading businesses. ANZVGP 111 sets out what a report valued as a going concern must include, but not the method. APES 225 leaves the method to the accountant's judgement. The Australian Valuers Institute publishes a hotel and motel methodology guideline, but it is written for rating and taxation valuations, not loans. How a lender reads the result is covered in how a commercial lender reads a going concern valuation.
No. The GST supply of a going concern is a tax treatment agreed in the contract. The ATO treats it as GST-free where the seller supplies everything needed to keep the business running and carries it on until the day of sale, the sale is for payment, the buyer is registered or required to be registered for GST, and both parties agree in writing. A going concern valuation is a separate question about value. A sale can be GST-free as a going concern and still be financed against a property-only figure. Ask your accountant and solicitor about the GST clause before you sign.
For a loan, usually a property valuer from the lender's panel. That valuer can value the freehold going concern as a whole under ANZVGP 111 and IVS 200, or the real property alone, depending on the instruction. An accountant working under APES 225 may be engaged separately to value the business, for example for a sale, a dispute or tax. They are different exercises under different standards, and a lender generally relies on its own valuer's report.
Generally not. Lenders usually instruct a valuer from their own panel and rely on a report addressed to them. A valuation you commission yourself can still help you price the offer and prepare the records the lender's valuer will ask for, so it is not wasted, but expect the lender to order its own.
Usually the borrower, even though the lender instructs the valuer and the report is addressed to the lender. Confirm the fee, and what the valuer is being asked to value, before the instruction goes out. A report re-instructed after a scope dispute usually means a second fee and more time off the finance condition.
Not always. The lender instructs the valuer and is the client for the lending report, so access depends on the lender's policy. If the full report is not provided, ask for the valuation figure, the basis of value, any split between property and business, the key assumptions and the adjustments made to the trading figures. Those are the parts that affect the loan. If you are a small business customer of a bank that subscribes to the Banking Code of Practice and you paid for a commercial valuation, the Code commits the bank to give you a copy and the valuer instruction, except once enforcement has started.
Expect to be asked for the trading history behind the price: profit and loss statements and the BAS that reconcile to them, occupancy and room rate records, the list of furniture, fittings and equipment, any licences, and the lease or management agreement if the business is not freehold. Where the property is valued as a going concern, ANZVGP 111 says the report should state where the trading figures came from, annex a copy and show any adjustments. On a purchase most of these records belong to the seller, so the contract and the agent need to get them to the valuer quickly. What lenders accept from them is set out in what lenders accept from motel trading records.
It depends on what the lender instructed. ANZVGP 112 says that in Australia chattels are not normally included in a valuation of real property for mortgage and loan security purposes, and are only included on lender instructions. A freehold going concern, as valuers define it, normally does include plant, equipment and chattels. ANZVGP 111 asks the valuer to state clearly which items are included and which are excluded, so read that list in the report rather than assuming.
Usually not in the freehold going concern figure described by the Australian Valuers Institute's hotel and motel methodology. That guideline includes land, buildings, operating plant and equipment, licences, goodwill and chattels, but excludes stock on hand. For a loan, read the actual valuation instructions and inclusions because the lender can ask for a different scope.
The term of art in Australia is future maintainable earnings: the level of earnings a buyer could reasonably expect the business to sustain, derived from the trading history and adjusted for items that will not recur or that will change under new ownership. No standard publishes the adjustments, which is why the same accounts can support more than one defensible figure. What lenders accept from the records is set out in what lenders accept from motel trading records, and how it is treated on an existing loan in refinancing an accommodation business.
Only where the records support it. An owner working unpaid is a real adjustment in principle, because a buyer who hires staff to do that work will carry the cost, but an assessor who cannot see what the role involved or what replacing it would cost will discount it. Add-backs that rest on assertion rather than records are the most common reason a presented earnings figure and an assessed one part company.
Against the figure in its valuer's report, on the basis it instructed: a going concern figure, a property-only figure, or a going concern figure split into its parts. Lenders differ in how much they will lend against the business and goodwill part, because the property is what survives if trading stops, so the split matters as much as the total. The bands by asset type are set out in accommodation lending by asset type and location.
The difference has to be met, restructured or renegotiated, and which of those is available depends on the contract you signed and the time left on the finance condition. A finance condition usually covers loan approval, not whether the lender agrees with the price, so a lender can approve a smaller loan and leave you bound to settle; ask your solicitor about a separate valuation condition before you sign. The mechanics are set out in what to do when a valuation comes in under the contract price.
Sometimes, but reassignment is not automatic. The incoming lender must be willing to accept the valuer and scope, and the valuer must be willing to extend or reissue reliance after considering the engagement terms, purpose, conflicts, risk and professional-indemnity position. The Australian Property Institute says, as a general rule, assignment should not be undertaken without that assessment. If the scope is different, the report is stale or the new lender will not accept the valuer, a fresh valuation may be required.
Because the asset is a bundle of separate things with separate lives. The caretaking agreement, the letting appointment and the manager's residence are assessed on different bases and can end at different times, so a single figure over the lot tells a lender less than it appears to. The sector also has its own conventions that sit outside any published standard. The detail is in the management rights guide and the term itself in the management rights glossary entry.
No Australian standard sets how long a valuation stays valid; it is a lender policy question. A valuation describes a position at a date, and on a trading asset that position moves with the trading. Where the trading behind a report has changed materially, expect the lender to ask for it to be revisited, and allow time for that in the contract.
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