There’s No Business Like Motel Business: Four Profitable Paths
- AquaTerra Brokers
- Sep 20, 2024
- 3 min read
Updated: Oct 25, 2024
If you’re thinking about entering the tourism industry, purchasing a motel is an excellent starting point. Owning a motel offers a variety of lifestyle and business benefits, including the flexibility to set your own hours, enjoy family-friendly on-site accommodation, and interact with guests from all over the world.
Running a motel truly stands out as a rewarding venture.
Before making a purchase, it's important to understand the different types of motel ownership available. Options include freeholds, leaseholds, freehold going concerns, and investment motels. Knowing the benefits of each can help you decide which path aligns best with your business goals.
Investing in a Leasehold Motel
When you choose a leasehold motel, you’re essentially renting the property but owning the business. Depending on the location and purchase price, you can generate a healthy profit after covering rent expenses. Typically, an initial investment starts around $300,000, though this figure can vary based on the business’s size and location.
Leaseholds offer a great way to enter the motel industry, but there are key factors to consider as you develop your business plan. First, what are the annual rent costs, and how can you maximize profits despite this? Also, review the lease terms carefully—are there any restrictions or obligations that could impact your operations?
One major advantage of a leasehold is that it offers flexibility. If you decide that motel ownership isn't for you, exiting may be easier, depending on your lease agreement. Additionally, from a personal standpoint, some find leaseholds more affordable than buying a family home in a major city.
Opting for a Freehold Investment Motel
With a freehold investment, you purchase the land and property but not the business itself. Instead, your income comes from the rent paid by the tenant who runs the motel. Freehold investments often start at around $650,000, with typical returns of 8-10%, making them a sound financial option.
Before investing, it's important to evaluate factors like the size of the land, the potential for expansion, and the condition of the property. Consider whether you’ll need to invest in renovations, as maintenance and some refurbishment costs fall on you as the owner.
Choosing a Freehold Going Concern Motel
For those seeking the best of both worlds, a freehold going concern motel is an ideal choice. In this case, you own both the land and the business, allowing you to live on-site and profit directly from the motel’s operations.
While this option may come with a higher price tag, it offers the greatest level of control and profitability. You won’t have to negotiate with a leaseholder, and all the profit generated by the business is yours to keep. Additionally, when the time comes to sell, a freehold going concern can fetch a substantial lump sum, providing a valuable return on investment.
Investing in a Motel Through a Syndicate Partnership
Motels are known for delivering solid profits, which is why banks are often willing to finance them. If you’re interested in benefiting from motel ownership without the day-to-day responsibilities, a syndicate partnership might be a great option. In this arrangement, you invest in the motel alongside others, with a working manager handling the day-to-day operations.
As a silent partner, you enjoy passive income based on your share of the ownership structure, without the need for ongoing involvement. Syndicate partnerships offer diverse profit potential, making them an appealing option for investors seeking returns with minimal management responsibilities.
Location Is Key
Whether you’re buying or investing in a motel, location is a crucial factor to consider. While coastal motels are often popular with tourists, inland motels also have the potential to generate significant returns, particularly if they are located near attractions, rural industries or busy routes.
No matter which option appeals to you, AquaTerra Brokers is here to assist. With a diverse portfolio of motels across Australia, we offer investment opportunities that cater to a wide range of requirements.
To discuss your motel investment goals or to list a property with us, don’t hesitate to reach out to our team.
