EBOOK: Buy a motel business with absolute confidence
Why buy a motel business?
MOTELS ARE PART OF THE AUSTRALIAN ETHOS
For many Aussies, dropping in for a few nights stay in a motel, whether on the way to somewhere or their final holiday destination, is a time-honoured tradition. Motels are located in practically every city and owning a motel business can be a highly lucrative business when done right.
A LIFESTYLE CHANGE FOR THE BETTER
Many motel business owners find the lifestyle of running a motel extremely appealing. They can live where they work, find the cost of living is greatly reduced and they get to work with a wide cross-section of the Australian public.
CHANGE IS AS GOOD AS A HOLIDAY
Are you considering ditching the 9 to 5 rat race to buy a motel by the coast, in the city or in the country? Maybe you’ve already decided to buy a motel but you are unsure where to start. You may even already own a motel but you need the help of an experienced motel Accountant who understands the motel business industry, inside and out.
LET’S GET SERIOUS
If you’re looking for for a career change then buying a motel really can be a great new direction. Yet buying a motel is more than just a lifestyle change. You are buying a business. Before you commit, you’ll need to be well-equipped to ensure your dream remains financially viable.
The business of owning a motel
Specialists in motel business accounting
When it comes to buying, operating and selling motels, Rogerson Kenny Business Accountants have a wealth of industry knowledge. Our intimate knowledge of motels means our clients have come to rely on us for business advice, tax advice, tax planning and, of course, yearly tax office compliance requirements.
To achieve your best possible outcome, it’s crucial to have an experienced motel business Accountant by your side when buying, operating or selling a motel. Specialisation is the key. Having an industry specific Accountant on your side means you will have someone who understands the motel business industry and will work solely for you and act only in your best interest.
From the outset, we urge you to use our expertise when looking to buy a motel business. We are happy to be your first call and answer any queries you may have about the motel industry.
What will you buy?
Leasehold Business or Freehold Going Concern?
(Most people won’t know the answer to this question, pick a model to suit you)
LEASEHOLD BUSINESS
Perfect for first time buyers
Most first timer motel buyers acquire a Leasehold Business. It’s a less risker proposition plus the cost and finance requirements are obviously less. The main aspects to consider for a lease is the location, length of lease and the percentage of rent that is charged (22% to 25% of accommodation turnover is reasonable). Their may also be stamp duty on a leasehold only when buying, so be careful to check with either the broker or solicitor when considering a business.
FREEHOLD GOING CONCERN
For experienced operators
A Freehold Going Concern refers to buying the land and business together. This includes buildings, plant and equipment, goodwill; the lot. A Freehold Going Concern is usually much more expensive than a leasehold business and such a purchase is typically made by more experienced operators on their second or third motel Business. Mostly it comes back to your experience, your willingness to jump into the deep and your ability to finance.
Assemble a Support Team you can trust
The Accountant
When buying a motel an Accountant is critical to the successful purchase of your motel for a fair price. The Accountant is effectively an employee of the purchaser, working in your best interests. It’s important to speak to an Accountant from the very beginning of your search. Talk to your Accountant about your options- Freehold Going Concern or Leasehold Business- to gain an indication of how much you could borrow and where you should start. Making contact early means you will be able to deal with the brokers confidently, knowing what you are looking for and your price range.
The Broker
The broker is the link between motel buyers and sellers- much like a real estate agent. You can find specialist brokers that deal in the motel industry and general business brokers that will sell anything from a milk bar to an engineering business. The specialist broker is the best place to start as they will often have the best motels (as they know them) and will have a detailed information booklet on the motel.
The Banker
In most cases, you are going to require the services of the bank, to help you either obtain finance for the purchase, arrange working capital, organise hire purchase leases or bank roll some form of improvement or expansion to your motel business. It is important that your banker has knowledge of the industry. This will assist your finance being approved. A local bank manager will most will have no idea of industry norms or past deals financed and will be taking a cautious approach. It is best to use an experienced Accountant who can then introduce you to a banker in the industry.
The Solicitor
The solicitor will come in to play when it is time for you to make an offer. It is best to use an experienced solicitor who is familiar with motel business transactions. Typically an offer is made subject to conditions, such as finance, due diligence and legal approval, for example. The solicitor will check the contracts, the lease, check permits, titles, understand or be aware of local governments acts, rules and regulations and the like. The solicitor will deal with the broker, Accountant, vendo’rs solicitor and most likely the bank’s solicitor.
Take your pick:
an example of five structures to buy a motel business
1. SOLE TRADER
A sole trader is a single person operating a business in their own name, e.g. John Jones. They can register a business name, such as Foreshore Motel.
2. PARTNERSHIP
A partnership is formed when two or more people (up to 20) go into business together with a view to making profit.
3. UNIT TRUST
Not such a common structure, but great for unrelated parties who want to be in business together.
4. COMPANY
A company is an independent legal entity able to do business in its own right, sue and be sued. It also is its own tax payer. The shareholders own the company, and directors run the company. This is quite a common structure with many advantages and disadvantages.
5. FAMILY TRUST
Otherwise known as a Discretionary Trust, this structure is possibly the most common structure to buy a motel business. It provides great flexibility for income distribution and small business Capital Gains Tax options. Plus, it offers great asset protection.
YOU’VE FOUND YOUR PERFECT MOTEL
Are you ready to make an offer?
Before taking that big step make sure everything is aligned. To be fully prepared, download our free eBook.
It is crammed with all the information you need to make an informed and confident decisions when you decide to take the plunge and buy a motel business.
