Motel Investment

Hi Thr1llied.
Very glad to hear someone is benefiting from the posts.
Any cashflow that cannot be substantiated, cannot be sold.
Valuers will disregard it.
Any large difference in income between one year and the next, especially an increase approaching sale time, is cause for suspicion, and must be proven if accepted into the sale price equation.
As you already know, if a seller says they have already enjoyed tax free cash, then they have already been “paid” that amount, and
can’t reasonably expect to benefit from it again by selling it as part of the business income.

Items to look for with a sudden increase in income :
Proportionate increases in variable costs – those items which increase with occupancy such as laundry, electricity, gas, water, cleaner wages, room consumables like soap n shampoo.
Also if the claimed increase in occupancy was also enjoyed by the town or region, it would show up in Australian Bureau of Statistics information on that particular town or region.

It’s wise to engage your accountant and solicitor early in the process, to ensure free flow of information from the vendor’s accountant and solicitor to yours. Your accountant should carefully analyse the P & Ls. After you have looked at a number of motel P & Ls, there emerges a pattern, and anything which is outside that pattern raises questions. Ensure offers and contracts contain escape clauses like subject to valuation, or subject to finance on terms acceptable to the purchaser, or subject to your solicitor finding all documents acceptable, subject to inspections like building & pest.
Ensure there are no outstanding or onerous pending local council demands.
Ensure there are no outstanding or onerous impending demands from the landlord, no ongoing conflicts between landlord and tenant.
Coz you don’t want to buy into a well-shaken hornets’ nest.

Re assessing a motel. We paid a valuer $4500 to do an official valuation on the motel which the bank demanded, 75 pages worth arrived, best due diligence I’ve ever seen and spent last when we were sure we were going ahead subject to valuation. If you need the contact we’re happy to supply it, but don’t know if they operate in Victoria or have affiliates. They were actually a recommendation from a valuer we knew who was slightly out of area. Worth every cent. Valuers base their final figure on a number of factors, and it includes the condition of the property, age, P & Ls, competition, local economy, state of the national economy, SWOT analysis, comparable sales of other properties, capitalisation rate relative to the aforementioned factors among others, and other factors. A good valuation is quite comprehensive.

PM me contact details if you would like a chat.

Cheers
thecrest

Hi Thr1lled.
Our motel is on track, going very well, thanks.
Cheers
thecrest

Glad we took 18 months to find the right motel, worth the wait and due diligence.
It’s a member of a major chain, and woohoo the annual conference this year is in Fiji. (tax deductible).
Looking forward to that, Bula Vinaka.
Cheers
thecrest

Hi Riviana.
Sounds like you’ve really got it sorted. The Armidale location factors would’ve made it a great location.
Some like restaurants for the social event, but we prefer a 15hr day to a 19 hr day.

Hope you’re reaching the stage where you can grab a good motel quickly since they get snapped up fast.
Thanks for the congrats. We bought a big leasehold in Wagga, very strong motel city, going very well. Starting to sniff around for another one to run under management.

Hope you can get all your team ready to move quickly when the right opportunity presents itself.

Good luck, let us know how it’s going.

Cheers
thecrest

You’re very welcome.
Cheers
thecrest

Hi Heaton.
Do lots of homework and get help from your accountant and solicitor.
Interrogate their tradesmen, elec & plumber.
No such thing as too much homework.
good luck
Cheers
thecrest

Hi All & Thr1lled.
Thanks thr1lled for trying to locate a lease for me, I was on holidays away with a laptop but short on files.
Back with puter again and managed to find a blank simple english lease.

All the motels in our email and friends network report good figures lately and confidence.
This is despite all the political antics going on, shows a strong economy, it seems very hard to kill despite their best efforts.

There are some great motel buys on the market right now at very competitive prices, buyers market in my humble opinion,
provided finance is available.

Is anyone holding any current investment in motels in any way ? Or seeking?

Cheers
thecrest

Hi Milman.
Welcome to the Forum from me as just one of the Forumites.
The point of a confidentiality agreement is that you give assurances that you will be will be privvy to confidential information and you will be responsible and considerate with that information. As a potential buyer, it is necessary for you to be supplied with all the financials of the business for sale. These are usually emailed.
Other information you may request is :
Last 3 AAA Star rating inspection reports.
BAS statements last 3 years.
Profit & Loss statements last 3 years.
Lease document.
Type of resv system software.
Occupancy and sales reports last 3 years.
Maintenance reports – issues, repairs completed and pending.
Pest report.
History of Correspondence with landlord. Any issues with landlord ?
Vendor’s bank contact.
Vendor’s Valuation when purchased or more recent.
Check TripAdvisor reviews.
If member of chain, request vendor’s approval for a history dump of sales and commissions.
Same for a history dump of utilities, like gas, water, elec.

There are various levels of scrutiny and naturally costs increase with more due diligence.
Try to look at as many P & Ls for different motels as you can, so you can understand what is normal.
Normal meaning benchmarks like cost of utilities like electricity relative to occupancy.
ABS stats show average occupancy and $ for a region or town and are worth graphing.
Lots of due diligence to do so you can reach the point where you buy with confidence because you have done your homework.

Hopefully time is on your side.
It would help if you outlined your requirements like :
number of family members
Bedrooms required
Pets
Pool?
Region
Price bracket
Reno / trades skill level
Admin skill level
Customer skill level.
Private message me with some of that if you’re not comfy posting it all here, but more info per post helps the forum.

Happy to assist.
Cheers
thecrest