Greetings all,
This is all very new to me. The range of questions and answers are very informing if not sometimes at opposite ends, depending on your own investment ideas.
Now to my question. Has anybody looked at investing in hotels?
I have the opportunity to purchase the freehold of a hotel in a small country town (800 bodies) which is showing a return of 10% on the purchase price.
The hotel has been operating for many many years with the new tenants being possession for the past 12 months.
They have a five year lease with a 5 x 5 x 5 option with rent reviews tied into the cpi.
If anybody has any experience or any comments to pass on it would be greatly appreciated
Thanks Gazza
Hi Gazza,
We invested in a hotel a few years ago as a private investeor but only in the leasehold and the person was surpose to buy the freehold as well. it went very sour because of what he did and is now in jail for fraud. This hotel was on the market for 3 years and the vendor had to come down in price dramatily to get it sold. He has been back in control for the last 6 months and get not get a buyer for it as it seems to be to far from everywhere. There are problems with buying in the country such as drought and low comodity prices and depending how the people run it. We looked at another pub late last year and we decided against it as we have gone this path with real estate. One advantage with pubs is that the leasee pays all outgoings so 10% is okay but if you want to sell you might have a problem. I know the vendor of the pub we were in bought the freehold for $400,000 back in 1986 and the best offer that he has had is $500,000 but that could be because nobody likes him!! The other thing to consiser is the lender might only go to 60% lvr so just check that out. Hope i have been of help to you and if you want email me at [email protected]
Regards Chefman
Hi Gazza,
I am sure that I know the pub in question… What a small world it is!!
We went and looked at it a few days ago…Nice country pub! I believe that you could get it for MANY MANY MANY THOUSANDS LESS. Trust me!
Our biggest problems with this deal:
(1) The town has 2 pubs, with a possible supermarket getting a liquor licence. The town could probably not support this. The other one has something special going for it.
(2) The publican doesn’t seem too committed to staying on if things get any tougher. I believe he is paying WAY too much rent. If they walk away, the pub may take a while to find another suitable pub couple.
I can give more info if you require it. Don’t let me put you off, if you have done your homework. Feel free to ask any more questions if you need to.
Hope I have helped.
Regards,
Del
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