How to Buy a Motel in Australia: A Finance-Led Buying Guide
How to Buy a Motel in Australia | Switchboard Finance
Accommodation Finance
Motel Finance · Going Concern Valuation · Due Diligence
How to Buy a Motel in Australia: A Finance-Led Buying Guide
A buyer finds a tidy freehold motel and asks the obvious question first: can I get the finance? The honest answer starts earlier than the loan. A motel is bought and financed as a going concern, land, business and goodwill as one, and that single fact reshapes the deposit, the due diligence and the order you do things in.
Quick Answer
A motel is bought as a business, not just a building. Lenders size the loan against the motel's going concern valuation, the land, business and goodwill together, so the path runs through due diligence and structure before price. Freehold and leasehold motels finance differently.
A motel is financed as a going concern, not at the asking price
A motel purchase turns on three things: the tenure you are buying, the going concern valuation, and how the deal is structured. The land, the business and the goodwill are assessed as one operating whole, which is why the loan is sized against that valuation rather than the property alone. Work those three out before you make an offer, not after.
This matters most at the start. In deals I have seen, the valuation lands under the asking price more often than first-time buyers expect, so working out how the deal will fund belongs before the offer, not after. A freehold motel carries real property security, which is why motel finance on a freehold going concern is read more favourably than a business-only purchase, and why the going concern valuation sits at the centre of the whole exercise. It is one piece of the wider accommodation finance picture.
Freehold going concern or leasehold motel: tenure sets the finance
Tenure decides how a motel finances, because a freehold going concern and a leasehold motel are read very differently by a lender. Own the land and the business together and the security is stronger; own only the business under a lease and the lender is weighing the lease as much as the takings.
Freehold Going Concern, Stronger Fit
- You buy land, business and goodwill as one asset
- Real property security supports a larger loan
- Around a 30% deposit on a freehold going concern, indicative and varies by lender
- The going concern valuation anchors the amount advanced
Leasehold Motel, Gets Tricky
- You buy the business, not the land under it
- Gearing sits lower, so the deposit is larger
- The remaining lease term tends to cap the loan term
- Lease conditions and the landlord's consent can make or break it
On a freehold going concern, expect around a 30% deposit, indicative and varies by lender, with the going concern valuation anchoring the amount advanced. A leasehold motel gears lower, so the deposit is larger, and the remaining lease term tends to cap the loan term. In deals I have seen, the lease has the final say on whether a leasehold motel funds at all, well before the takings come into it. Most motels, freehold or leasehold, change hands as a walk-in walk-out sale, where the business transfers as a running concern with stock and forward bookings in place, and our comparison of freehold versus leasehold sets out where each one lands.
Due diligence: what to check before you buy a motel
Before buying a motel, check the numbers that build the going concern: occupancy, RevPAR, the books, and, if it is leasehold, the lease. These are the inputs a valuer and a lender will test, so testing them yourself first is what keeps a deal from unravelling later. The federal government's guide to buying an existing business sets out the records to demand, including three to five years of tax returns, business activity statements, profit and loss and cash flow statements.
Read those records against how the motel actually earns. Strong headline takings can rest on a short peak season, so understanding what a going concern really includes, the trading business and its goodwill rather than just the building, is what separates a fair price from an optimistic one.
Financing the purchase: deposit, valuation and settlement
Financing a motel comes down to three things: the going concern valuation, the deposit it implies, and how you cover any gap to settlement. Because the loan is sized against the going concern rather than the bricks, the valuation can land under the contract price, and the deposit moves with it.
Where you hold other real estate, supporting security can bridge the deposit gap, and an equity release or refinance against an existing property is a common way to do it. A seller who agrees to carry part of the price through vendor finance can narrow the gap too, often structured alongside a lender's facility rather than instead of it, as our explainer on partial sale and succession shows. Switchboard Finance arranges secured, business-purpose credit for accommodation going concern purchases.
A motel is a going concern buy: you are financing land, business and goodwill as one, and the going concern valuation, not the asking price, is what the loan is sized against. A freehold going concern gears higher and asks for around a 30% deposit, indicative and varies by lender; a leasehold motel gears lower and lives or dies on the lease. Get the due diligence and the structure right, and the finance follows.
Key takeaway: value the going concern and settle the tenure question before you make an offer, because both decide how the motel funds.Frequently Asked Questions
Before buying a motel, check the things that drive the going concern: occupancy, RevPAR, the books, and, if it is leasehold, the lease. A buyer should review three to five years of financials and confirm how the takings are actually earned across the year. Reading our guide to what a going concern means helps you see why those numbers, not the asking price, set the loan.
The deposit to buy a motel typically sits around 30% on a freehold going concern, indicative and varies by lender, and higher on a leasehold. The going concern valuation, not the asking price, drives how much a lender will advance, so the deposit follows the valuation. Where you hold other real estate, supporting security and an equity release can bridge the deposit gap.
A walk-in walk-out sale means the motel changes hands as a running business, with stock, forward bookings and operations in place so you can keep trading from day one. It is the common way both freehold and leasehold motels transact. How it is financed still comes back to the motel finance structure and the going concern valuation.
A leasehold motel is generally harder to finance than a freehold going concern, because the lender is securing against a business and a lease rather than land you own. Gearing sits lower, the deposit is larger, and the remaining lease term tends to cap the loan term. Our comparison of freehold versus leasehold sets out where each one fits.
Vendor finance can help buy a motel when the seller agrees to carry part of the price, which can narrow the gap between your deposit and the going concern valuation. It is common on going concern sales and usually sits alongside, not instead of, a lender's facility. Our explainer on vendor finance and on partial sale and succession shows how the structure works.
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