Motel Finance for Self-Employed Buyers
Motel finance: the deposit is smaller than the LVR looks.
Buy or refinance a motel, freehold going concern or leasehold. The headline LVR is not the cash you need, because supporting security does most of the heavy lifting. We structure around the going-concern valuation, not a refurbishment loan, and not a pub.
Business-purpose motel finance, structured around the valuation, your security and a clean path in.
Two titles, one motel.
What you actually buy decides the LVR, the yield and the loan term. Tap each.
You own the land, the building and the trading business, and pay no rent. Typically financed up to around 70% of a going-concern valuation, with the manager's residence usually on the same title.
Is the deposit really 35%?
The single thing that stops most buyers, and the reason it stops fewer than it should.
The fear
A 70% LVR reads as 30% in cash
On a $1.2m freehold that looks like $360k plus costs sitting on the table. Most buyers assume that number is the wall and walk away from a motel that would have worked.
The reality
Supporting security carries the rest
A home or another commercial property pledged as supporting security lets total lending move toward 100% of the price. The cash you actually inject is often costs and a modest contribution.
The real deposit depends on your equity, not the motel's LVR alone.
How the money stacks up.
The purchase price is funded as a stack: the senior facility against the motel, lending secured on your other property, and the cash you bring.
Freehold or leasehold, side by side.
The same motel can be sold either way. The structure you buy changes the whole shape of the deal.
Own the lot
Land, building and business in one. Higher entry, lower yield, but it is yours outright and the home is usually on the title.
Own the business
You run the motel and rent the land. A third of the entry cost and a higher yield, but the loan cannot outrun the lease.
Valued as a business, not just bricks.
A trading motel is worth more than the sum of its rooms. The lender applies the LVR to the going-concern value, which is why it can sit above a plain property valuation.
A going-concern valuation weighs the trading history, occupancy and room rates, the tariff mix (corporate, highway, tourism), the condition of the building, the location, and the maintainable earnings a new operator could reasonably expect. It is why two motels at the same price can value very differently, and why the figure feeding your going concern calculation matters as much as the asking price. Read more in going-concern valuation explained.
The four things that decide it.
A motel decline is rarely a credit problem. It is usually one of these four, presented poorly. Tap each.
How a purchase is built.
We arrange the senior facility and structure the deal around the path that fits your position.
From offer to settled.
A motel purchase moves on the valuation and due diligence, not on a clock. When it does run to a clock, that is a different tool.
Pure timing pressure, like a probate sale or a gap between exchange and settlement, is a job for private lending or a caveat loan, then a refinance.
Deals like yours.
Three buyers, three structures. Tap each.
First-time sea-change buyers. A regional freehold motel with the residence on title. The equity in their city home came in as supporting security, so the cash they needed dropped to costs and a modest contribution, and the business and the home were financed as one.
Motel finance, or something else?
A motel purchase
Motel finance
Buying or refinancing a freehold or leasehold motel is a going-concern deal, financed on the valuation with supporting security. That is this page, sitting alongside a senior commercial property loan.
A different job
Timing, pubs, or a refit
Pure timing is private lending or a caveat loan. A pub or hotel with gaming has its own page. A refurbishment-only spend is equipment finance, not this.
Motel finance, answered.
On a freehold going concern the market typically lends 60 to 70 percent of a going-concern valuation, so the headline gap looks like 30 to 40 percent plus costs. In practice the cash is often much smaller, because supporting security such as a home can lift total lending toward 100 percent of price. The real number depends on your equity, not the LVR alone.
Yes. Many motel buyers are first-time operators, often couples buying a business and a home in one. Lenders weigh the trading history, the valuation, the security and your position, and a clear business plan carries you where hands-on experience is light.
A freehold going concern means you own the land, building and business and pay no rent. A leasehold means you own the business and rent the land. Freehold lends higher (around 60 to 70 percent) and yields less. Leasehold has a lower entry and higher yield, but a lower LVR and a loan capped inside the lease.
In most freehold going concern motels the manager's residence is on the same title, so the business, building, land and home are financed as one going-concern transaction. That is normal for the asset class.
Yes, but against the lease. The financier takes a mortgage over the lease, needs a deed of consent from the landlord, and caps the loan term inside the remaining lease, commonly up to about 15 years. The LVR is lower than freehold, with supporting security able to improve it.
It values the motel as a trading business, combining land, building and established trade into one figure rather than the bricks alone. It is the number lenders apply the LVR to, which is why it can differ from a plain property valuation.
As a market guide, freehold going concern and freehold investment motels are typically financed up to around 70 percent of a going-concern valuation, and leasehold up to around 50 percent. With supporting security, total borrowing can move toward 100 percent of price. Final terms depend on the asset, its trading record and your position.
Sometimes. Vendor finance is where the seller leaves part of the price in the deal, behind the senior lender, usually interest-only and repaid within a few years. The senior lender's consent to the vendor sitting behind them is the critical step.
Buying or refinancing a motel?
Freehold or leasehold, first motel or fourth, we can show you how it could be funded and what your deposit really needs to be.
By Nick Lim, founder of Switchboard Finance. Credit Representative 576702 under ACL 384704 (Finsure). General information, not credit, legal or tax advice.