 | | | | BUYER
ENQUIRY FORM **
REQUIRED FIELDS | Tips
To Consider When Buying A Hotel Or Motel Hotels/pubs
can be great investments. For this reason, the last few years has seen Investment
& Financial Institutions including hotels/pubs in their portfolio. Large corporations
like Woolworths and Coles are buying up pubs and pub owners are forming syndicates
in order to buy several pubs. This drives demand for hotels/pubs upwards. Demand
for quality hotels/pubs is not only in the metropolitan areas but also in regional
centres and smaller country towns. While investment in this industry is generally
sound, not all hotels/pubs will suit everyone, especially if you are thinking
of buying your first hotel. There are lots of questions you will want to ask ranging
from what type of property to buy and what is the best way to finance it. Below
are some tips to consider when contemplating the purchase of a hotel, motel, tavern,
nightclub or pub. Before
looking at hotel/pub to buy | |
- Know
why you want to buy - for example, lifestyle, more profit, potential to improve
the property's performance.
- What
are the expectations - family oriented, easy to run, return on investment, put
in the hard work for a few years and move on, something with development potential,
etc.
- How much
money can you afford or want to spend - can you borrow from a financial instution,
will you need to put up your home as collatoral, do you need to go into partnership
with friends or family members, etc.
-
Engage a hotel broker with experience and understand e.g. Gilchrist Business Brokers
has had experience in operating hotels/pubs, been through the buying process many
times over and has run successful hotels as well as selling.
Looking
to buy and before making an offer  - Talk
to Gilchrist Business Brokers to determine exactly what type of hotel you are
looking for, what your expectations are, any assistance required in regards to
financing, market condition, etc.
- Go
through a list of hotels that meet your requirements with Gilchrist Business Brokers
or if there is a hotel that interests you then ask Gilchrist Business Brokers
to act as your agent in approaching the owner.
- Stay
at the hotel as a guest for a week. Try to do this before anyone is aware that
you are considering the property. This will give you the opportunity to view the
hotel or motel as a guest would.
- Avoid
discussing price with the owner of the property. It is better to let the broker
handle the negotiations with the owner. You should know in advance what you are
willing to pay for any property.
- Check
out the current competition taking into consideration otential for future competition.
Also consider the local reputation of the hotel. If it isnot positive, it may
be difficult or take time and effort to change local opinions. A negative reputation
drastically lowers the market value of the property.
- Look
at financial statements for the past two or three years. Verify all financial
information.
Making
an offer & acceptence Once
you have found a property that best suits your needs and budget, make an offer
through Gilchrist Business Brokers. If any negotiation is needed Gilchrist Business
Brokers will mediate between you and the seller until the best possible outcome
for both parties is reached. After
the offer has been accepted - It
is recommended that due diligence is completed before exchanging contracts. During
this period, Gilchrist Business Brokers will coordinate your request for documents
and assist in arranging meetings with related parties such as lawyers, accountants,
valuers, etc.
- As
with any property purchase, structural condition should be checked and inspected
by a professional. Necessary repairs, as well as the need for updated furnishings,
fixtures, equipment, and inventory should be considered. This information will
help you in determining the market value of the property. Once the sale is complete,
make sure that the owner gives you a separate bill of sale for all furnishings,
fixtures, equipment, and inventory, as well as the deed to the property.
- Check
with the local government about planned changes and roadway constructions. If
the property is on a highway, and there are plans to build a loop, the property
and business may not be as valuable as you thought it was.
- Review
contracts that the current owner has with suppliers, as well as customer groups.
Find out if those contracts will be renewed or valid after you take over the property.
Be sure that the contracts will be satisfactory for you as the owner of the property.
If there are existing contracts you may wish to cancel upon purchasing the property,
make sure that you will be able to cancel those contracts without being penalised.
- Make
sure the property is currently in compliance with governmental requirements. Consider
what licenses and permits you will need to operate the property, as well as the
requirements and costs in obtaining those licenses and permits.
- Find
out what insurance company is currently insuring the property and premiums costs.
Do your own insurance cost investigation to ascertain whether you may be able
to secure more extensive and cost efficient coverage.
Exchanging
contracts -
If the offer is subject to finance approval, once that has come through, the owner's
lawyer will draw up the contract for both parties' lawyers to go through. If all
conditions are acceptable, both parties will sign and exchange contracts.
- At
the exchange of contracts, you will need to pay approximately 10% of the property
sale value as deposit or a pre-agreed amount to the seller.
- It
is usual for the buyer to have a 30 day study period, and this is usually set
down in the letter of intent or the agreement of sale. Use this period to check
things out to your satisfaction. If you are not satisfied, you can back out of
the agreement. However, you may forfeit your deposit or pre-agreed amount.
Settlement
On the settlement date, usually 30 days after exchanging contracts, you will be
required to pay the seller any balance of the payments owed.
Congratulations!!! You are now the proud
owner of your dream hotel/pub. As
you can see there are a lot of things to consider and information to absord when
considering the purchase of a property. This is why it is highly advisable to
engage a competent and trust worthy broker such as Gilchrist Business Brokers
act on your behalf. If you would like more information, simply contact
us on (02) 6369 1055 or complete the form at the top of this page and we
will contact you at a time that is convenient to you.
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