All Topics / Help Needed! / Motel Leasehold

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  • Profile photo of Hunter101Hunter101
    Member
    @hunter101
    Join Date: 2011
    Post Count: 1
    February 17, 2011 - 5:27 am

    Hi,
    Say I purchase a leasehold for $1mill with a 25 year lease, It produces market ROI, it is maintained and improved as nesacarry and has a market average growth over its first 10 years.
    I have depreciated it on the books over that 10 year period.
    I now choose to sell the lease with now a 15 year term remaining, is there a rule of thumb that would determine the selling price at that stage.
    Is there a rule of thumb when it is best to on sell a lease to maximise the new lease $ purchase.

    Cheers

    Hunter101

    Profile photo of thecrestthecrest
    Participant
    @thecrest
    Join Date: 2004
    Post Count: 992
    February 17, 2011 - 6:22 am

    Good question.
    Buyer perception is that anything over 21 years is a life sentence, anything under and they start amortising the lease purchase price into annual costs.
    Leases with only 15 years remaining are not easy to sell.
    One formula would be – the market value of the lease with 25 years remaining minus the cost of buying 10 years from the landlord. Depending on the condition and desireability of the property and business, landlords are asking around $5K p.a.
    Many leasees will buy extra years from the landlord to increase the lease to over 21 years or thereabouts when selling so their lease is more attractive to the buyers and finance providers. 
    Cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
    http://www.statewidemotelbrokers.com.au
    Email Me | Phone Me

    selling motels in NSW

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