You have made all your plans and scouted properties and found a few that you like and now it’s time to talk money. The sun is shining brightly and you can visualise yourself in your new business. But then, storm clouds suddenly appear when you realise that you need money to finance this grand dream. In other words, you’re in a situation where you want to borrow money to finance the purchase of the motel that you’d like to own and run.
Loan to Value
The first thing you need to know is that the amount of money you want to borrow will vary from lender to lender on the same property. A lot also depends on the way you present your case to the lender. A Loan to Value (LVR) only provides an indication of what you can raise on your prospective property.
The LVR for properties in Queensland are as follows:
- Freehold going concerns will get up to 70% of the valuation
- Freehold investments will also get up to 70% of the valuation, and
- Leaseholds will get up to 50% of the valuation.
The valuation is usually done by an independent agency and a motel for sale broker can assist you with information about how much you can borrow and who (i.e., financial institutions) will lend it to you. Remember that to get the approval, you will need to provide the financial institution with a number of documents. This includes your personal history with running businesses, the valuation of the property you intend to buy, a comprehensive business plan and budgeted cash flow, financial statements for the preceding 3 years from the motel, income tax statements of the purchasers/guarantors and a statement of the assets and liabilities of the purchasers/guarantors.
It is best to always work with a motel and accommodations broker, even if it will cost you. The broker will know more than you do.