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I’ve done motels to death. I don’t want to be responsible for peoples needs on a 24 x 7 basis so I’ve never gone into one. But here are some rules of thumb picked up from agents, lawyers and seminars.

The ultimate aim is to own a freehold and lease it out.

They sell as leaseholds at a price which is roughly equivalent to the annual turnover.

Freeholds should be about three times turnover.

You can get finance for about 50% of a leashold and 66%+ for a freehold.

Never buy a leasehold with less than 20yrs to go.

Pay yourself back for the lease before you start to use the income other than for living.

Investment motels, (already leased freeholds) sell at a return of between 8 and 12%. The higher the % the crappier the property.

Leaseholds return between 20 and, sometimes, 30% on investment.

Check that all chattels are owned.

If you want more, just ask.

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Thanks enduser,

Valuable information.

I am only considering buying an investment property, ie with a lease already in place.

And I guess I was just wondering why the net yield is so high compared to other commercial real estate especially when the ptoperty I’m looking at has a 10.5% yield with a new 25 year lease in place.

Thanks

Neil