How much deposit you really need to buy a motel or park
How Much Deposit to Buy a Motel | Switchboard Finance
Accommodation Finance
Motel Deposit · LVR · Going Concern
How much deposit you really need to buy a motel or park
The headline LVR is not the cash you actually need. Here is how deposits and gearing really work across motels, parks and pubs, and what lifts a buyer toward the full purchase price.
Quick Answer
The deposit to buy a motel or caravan park is rarely the headline figure on its own. What a buyer truly contributes depends on the asset's tenure, the strength of its trade and any supporting security in the deal. Start with the motel finance picture before setting a budget.
How much deposit do you actually need?
Three things set the deposit on a motel or park: the tenure, the strength of the trade, and the security a buyer can add. A lender quotes a loan to value ratio against the going concern valuation, and the deposit a buyer actually funds is the gap between that loan and the full price, plus stamp duty, working capital and the usual transaction costs. Underneath that, what lenders actually look at first is the strength and documentation of the trade, because a well evidenced going concern supports both the valuation and the loan that sits on top of it. That is why two buyers can look at the same motel and need very different cash.
Deposit and LVR by asset class
Different accommodation assets gear differently, so the deposit shifts with the asset class. Freehold going concern motels and parks are typically financed up to around 60 to 70% of the going concern valuation, indicative and varies by lender. Pubs carry more spread: pubs with gaming reach up to around 65% freehold or 70% leasehold, indicative, while freehold pubs without gaming can sit as low as about 50%, indicative, because the income is less diversified. The table below sets out where each lane commonly lands.
A pub or hotel purchase and a caravan park therefore start from different deposit positions, even at the same price.
What lifts your borrowing toward 100 percent of the price
Supporting security is what moves the deal. Supporting security lifts effective gearing toward about 100% of the purchase price, indicative, by adding assets the lender can rely on beyond the business itself. Where this helps most is a buyer who already owns residential or commercial property with equity to spare. The cards below show what tends to lift gearing and what tends to hold it at the headline LVR.
From where I sit arranging these, the first number that matters is what cash a buyer actually needs, after supporting security, not the sticker LVR. A lender will also want to see a credible exit, because the way a buyer eventually repays or refinances shapes how much it will advance today.
The going concern valuation the LVR is applied to
Every LVR in this article is applied to the going concern valuation the LVR is applied to, the value of the business as a trading whole rather than bare land and building. That is the number the deposit is really built on, so anything that strengthens the trade, clean books, a documented occupancy history, a sensible tariff, strengthens the borrowing position too. It also helps to remember the scale of the market a buyer is stepping into: accommodation businesses sit within Australia's broad small business base, which the ABS counts in the millions. If you are weighing a purchase, the going concern concept and the property lending hub are the right places to build the rest of your plan.
Across motels, caravan parks and pubs, the deposit you need is set by the going concern valuation and the asset's tenure, then reshaped by any supporting security you bring. Freehold going concern motels and parks typically gear around 60 to 70%, indicative and varies by lender, pubs spread wider by gaming and tenure, and supporting security can lift effective gearing toward about 100% of the purchase price, indicative. The headline LVR is a starting point, not the cash question.
Key takeaway: work out the cash you actually need after supporting security, not the headline LVR, before you set your buying budget.Frequently Asked Questions
The deposit you need to buy a motel depends far more on the going concern valuation and the asset's tenure than on any single headline figure. Freehold going concern motels are typically financed up to around 60 to 70% of the going concern valuation, indicative and varies by lender, so a buyer plans for the balance plus costs. Supporting security you already own can lift that gearing further, which is why two buyers of the same motel can need very different cash. See how the numbers stack up on our motel finance page or check what LVR means.
Borrowing 100% of a motel purchase price is possible in effect, but rarely from the going concern alone. The headline LVR on a freehold going concern motel typically sits around 60 to 70%, indicative and varies by lender, and the gap is closed by supporting security such as residential or commercial property you already own. With enough supporting security, effective gearing can move toward about 100% of the purchase price, indicative, though the lender still tests serviceability first. Read how security works alongside a motel finance structure.
The deposit on a leasehold motel is usually lower in dollar terms than on a freehold, because you are buying the business and the lease rather than the land and building. Leasehold is financed against the lease, commonly at a smaller loan with the term capped inside the remaining lease, so the entry cost is lower but the asset diminishes over time. Freehold going concern gives you the land, the building and the trade, a larger commitment but an appreciating asset. Our freehold vs leasehold going concern guide walks through what you can borrow on each.
A going concern valuation values the motel or park as a trading business, combining the real property, the plant and the established trade as one operating asset. The lender applies its loan to value ratio to that going concern figure rather than to a bare bricks and mortar value, which is why the valuation effectively sets your deposit. A stronger, well documented trade supports a stronger valuation, and a stronger valuation is what gives a lender room to lend. You can see how this feeds a deal on our caravan park finance page or in the LVR glossary.
Caravan parks, pubs and motels do not all sit at the same loan to value ratio, so the deposit varies by asset class. Freehold going concern motels and parks are typically around 60 to 70%, indicative and varies by lender, while pubs with gaming can reach up to around 65% freehold or 70% leasehold, indicative, and freehold pubs without gaming can sit as low as about 50%, indicative. That means a freehold pub without gaming usually asks for the largest deposit of the three. Compare the lanes on our pub and hotel finance page, or see freehold vs leasehold going concern for how tenure shifts the number.
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