When considering to purchase a Motel style property, you may choose to purchase a Freehold property (Land, buildings and business operations) or the Lease of a Property which will include the business operations, goodwill, goods and chattel (specifically excluding land and buildings). During the appreciation process some areas of consideration are in common but there are other areas that require separate analysis in their own right.

General Considerations to purchasing a Motel Business.

The following is a guideline list of factors and/or items that should be taken into account when appraising a Motel business for purchase:-

• The structural condition of the buildings, including age, condition of foundations/walls/roofing/guttering/swimming pool/gardens/ fences and the like.
• The location of the property and how critical that location is to the demographics of the particular area in question.
• Street appeal ( and/or it's potential)
• Private Accommodation. Is it suitable for yours and your personal family requirements.
• Kitchen and Restaurant areas (as applicable). Age of equipment, suitability to the type of operation you wish to conduct. Compliance with current health standards. ( request to see the last Inspection report by local Council or other relevant authority)
• Office and Reception areas including relevant management resources such as computer accessibility/use, public presentation, practicality etc.
• Room evaluation is critical. Consideration should be given to the physical dimension Size and layout of the motel unit. Size and layout of the ensuite, especially the condition of Toilets, basins and shower wet areas. Water pressure should be tested from all outlets. The bedroom area should be evaluated as to age and condition of furniture, including bedding/linen/bedspreads/curtains/bench tops/Televisions and especially air conditioners. Replacement time lines should be assessed.
• Financial Analysis. Professional assistance is suggested from an accountancy firm who has the ability to benchmark the fiscal performance of the property. Occupancy Rates, BAS returns, Room Attendant roster records, Staff sign on/off record books and forward room booking records are not unrealistic expectations for a genuine intending buyer to request. It is important to note that the vast majority of financial records do not take into account owners personal drawings for cost of living purposes.

Specific Freehold Purchases Considerations

When purchasing a freehold property special inquiry should be directed to the following:-

• Determining when the last Survey of the land area was completed
• Determine the Zoning Status, including current and future Council re-zoning plans or intentions.
• A Building health check is essential and to ensure there is no outstanding Council orders in place. At all times inspect the rear of buildings and windows for movement and possible drainage issues.

Specific Leasehold Purchase Considerations

Leasing can be a comfortable, rewarding and affordable mechanism to enter the Motel business. When purchasing a Leasehold business operation specific inquiry should be directed to the following:-

• Engage a legal representative who has experience in MOTEL Leasing, (see suggested parties list)
• Ensure you read and understand the terms of the lease. Leases vary greatly in respect of their terms and conditions.
• Evaluate the length of the Lease remaining, the rent itself, rental increase provisions as well as rent review mechanisms and/or your rights of review.
• A Leasee usually purchases the goods and chattels, so an exhaustive evaluation of the age, condition of and an appreciation of a replacement schedule is vital in any analysis.
• Within the lease itself, it is imperative that a clear explanation of what is the Leasor's responsibilities are, and that a procedure is in place to ensure the fulfilment of any appropriate obligation can be achieved if not willingly forthcoming from the Landlord. Similarly the Leasee's obligation should be clear and unambiguous in understanding.

Disclaimer: The information provided above is intended as a guideline only to an intending Purchaser of an Accommodation operation/business and may not include all considerations that should be undertaken. We advise that assistance legally and financially should be sourced from professionals who have quantitative experience within the Motel or accommodation Industry prior to any purchase undertaking is entered into.

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