Buying and Selling Tips

Buying and Selling Motels Tips / Industry Advice from John Griffin Realty LTD

We are a specialist motel broking company and our comprehensive background in the motel industry. Following is some information which may help you with the purchasing process. Should you have any questions please feel free to contact us.

Whether you are buying or selling a motel we pride ourselves on maintaining a friendly personal level of service catering to your individual needs. As a client of John Griffin Realty you can be assured that at every step of the way we will afford you the very highest standard of professionalism, integrity and confidentiality.

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Buying a Motel When you are looking at investing in a motel there are many questions that you need answering. How do I operate a motel? What do I need to know about the motel industry? Where do I find motels for sale? What is a motel lease? What is a Motel or business broker?

Check out our Motel Buying Tips.

 

icon_sellingSelling a Motel If you own a motel and would like to sell, we can give you a realistic market appraisal of your motel and provide you with a confidential or full marketing programme. We can provide you with professional specialist advice designed to suit your individual needs.

Check out our Motel Selling Tips.

icon_adviceMotel Industry Advice If you are running a motel we can help you make an informed decision with our in-depth industry knowledge. Having owned/operated motels and with many acquaintances in the motel industry we have many hints and useful ideas about running a motel business.

Helpful Motel Industry Advice.

 


 

icon_buying Buying Tips

buying tipsWhether you are interested in buying a motel lease, buying a freehold going concern or buying a freehold investment you will find John & Kathie possess the knowledge and experience you require to make the right decisions. Our culture is to provide you with all the information you need to decide if motelling is the right path for you. We provide a free no obligation consultation for people thinking of entering the industry. Come and talk to us, email us or phone us to receive valuable information for your decision making process. Have a look at our tips for buyers here, then contact us with your questions.

Lease:

Is the length of the lease important? Yes because it is important that when you are ready to move on and sell your motel you have a good number of years left on the lease. This ensures you are able to offer a long lease to maximise your return on the sale. It is however common within the industry to extend the number of years on a lease so talk to us or your agent about this.

Operators accommodation:

Is it important for the operators accommodation to be adequate for your own needs? Yes it is! People will sometimes purchase a motel and say well the house is not quite right but we can put up with it. They then have to spend a large amount of time in a space they are not happy with and eventually this causes a bit of misery. The house needs to be somewhere you can go and relax away from the motel. If you can’t achieve this then you may become unhappy and it will show through to the guests.

Is a lease business a zero rated item for GST? If the lease is in existence and the business is up and running then yes the sale and purchase is zero rated provided that both parties are registered for GST at the date the agreement goes unconditional.

Why should I use a Motel Broker?

A Motel Broker is a specialist in the motel industry. They have an in-depth knowledge of the product and the operation within the industry. Just like there are specialists within the medical profession such as a surgeon a motel broker is a specialist real estate professional in the area of motels.

How do I operate a motel?

Operating a motel is similar to most small businesses. There are admin tasks, planning tasks and day to day running of the business. We always say that there are two main ingredients to running a successful motel business: cleanliness and friendliness. Facilities must be spotlessly clean and you must ALWAYS be friendly to the guests.

 

Read more Tips.

Read more hints in our news section. Helpful hints and more.

 


 

icon_selling  Selling Tips

Selling tipsIf you are looking to sell your motel then contact us for a free market appraisal. We have comprehensive industry experience which allows us to advise you on your sale process, the current market conditions, and provide a written market appraisal of your motel. From this we discuss the options with you and should you decide to sell your motel our industry experience enables us to give advice on marketing and presentation so you can show your motel in the best possible light for sale. Read our sellers tips here, then call now for your free appraisal.

When is the right time to sell?

The right time to sell is when you feel it is right for you. Often people say well I want to sell but the market is not right just now. If you are buying and selling on the same market then things should work out okay. It is more important to have your business ready to sell than to wait for the right time.

What do people look for when buying a motel?

A motel purchase is a two dimensional decision. One aspect is the financial and business side and the other is the emotional decision. People will be looking for a good return on their investment and a place they will feel comfortable to live in.

What can I do to make my business more attractive?

First appearances matter. You do not get a second chance at a first impression!! Tidy up your motel. Complete any maintenance that is required and have everything spick and span.

What is a return on investment?

This is a way that people can estimate the worth of a business. In a motel people take the cash surplus as a percentage of the purchase price and this provides a figure for the Return on Investment. The cash surplus is usually stated before interest tax and depreciation. Most purchasers are expecting a return of approx. 18-25% on a lease business. On this basis taking cash out of a business reduces the cash surplus and affects the selling price by 4 to 5 times the amount taken out.

Types of Sales:

Private Sale: This is when you decide to sell the motel yourself through various methods one of the most common these days being Trade me. Most vendors see the advantage of this is that they are in control of the situation and they can also save the commission price. This in reality is often a misconception though. Firstly how do you price your business? The advertised prices of other complexes cannot be used as this is often not what they sell for. Neither can the local motel grapevine information be relied upon as this too is often incorrect. Next when a potential buyer first contacts you it can sometimes be difficult to ask the hard personal questions. How do you ask someone how much money they have or what they have done in the past or how much they intend to borrow? How do you know if they are telling the truth? The next step if you can get past this beginning process of qualifying the buyer is to convince them that your motel is the one for them to buy. This can be equally difficult. How much information do you give them? How much is not enough so they are not convinced and how much is too much so it scares them off? Lastly, if you get past the first two hurdles, is negotiating for the price. This can become very difficult when your emotions kick in and you are no longer a neutral negotiator. How do you reach an agreement on price when you have decided that you really don’t like this person due to your relationship up to this point? It is not about liking someone it is about selling your motel for the best price. Mistakes during the selling process will affect the eventual price and can even derail a sale completely.

Sale by agent: This is when you engage a real estate salesperson to facilitate the sale of your motel. Just as all moteliers are not created equal so to not all real estate sales people are created equal. There are a large number of sales people who are residential sales people and do not know the first thing about selling a business, there are business salespeople who have operated a business and then turned to business sales but who know very little about motels, there are moteliers who have owned a motel and then turned to selling motels and then there are specialist brokers who have completed years of further study to gain a National Diploma in Real Estate specialising in business sales, some of these have motel experience and some do not. I always use the analogy of going to a GP. They are fine for everyday ailments but I certainly wouldn’t use them to perform heart surgery on me. Likewise I would use a specialist to sell one of my largest assets. Just as a surgeon has spent years learning the skills to get the best possible outcome, so has a specialist motel broker. This knowledge and skill set enables them to achieve an outcome which reflects the maximum potential rather than trying to attempt the process with a private sale and usually results in a sale price which is high enough to more than cover the commission.

Listing Process: When using an agent the process is governed by the ethics and procedures of that company and also by the Real Estate Agents act 2008. One of the criteria of this Act is that the agent must provide a written appraisal of your business. This must be completed for you to see and must contain a comparison with other similar properties. As specialist motel brokers involved in the sale and purchase of motels these statistics are readily available through various means and most specialist brokers will have a good relationship with valuers involved in motels and this adds further to the available information. A specialist motel broker will provide you with an accurate market appraisal which will reflect the situation of your complex in the current market.

Different companies have different policies and you should ensure you are happy with the one you choose. Do you incur any cost for advertising? If so does the real estate company receive a commission on this advertising? What are the real estate company’s expectations of you? How will they market your property? Will they be present when a potential purchaser completes an inspection of your property?

Most importantly you need to feel comfortable with the Motel Broker. What are their qualifications? Are they a specialist motel broker? Are you comfortable discussing things with them or do you feel pressured? Do you like them? how long have they been a motel broker ?

Types of agency:

An agency is a legal contract which outlines the terms of the broker facilitating the sale of your motel. This is binding on both parties and enforceable by law. There are different types of agencies but the two most common are sole and general.

Sole agency: This is where you give the exclusive right to facilitate the sale of your business to one agent. Many companies seek this type of agency and some state they will not act for you unless you sign a sole agency agreement with them. This obviously is very good for the broker

General agency: This is where you give authority to an agent to facilitate the sale of your business but it is not exclusive so you can also give the authority to other agents at the same time.

Remember the choice of the type of agency is yours. You are in effect employing the agent to work for you and you can determine the terms. Most agents will state that even if you sign a sole agency they will work with all the other agents which is correct, but the real issue is other agents working with them. As a specialist motel brokers we are employed by a number of people who have listed their business or property with us. It is to these people that we owe our loyalty and these are the motels which we will try our hardest to sell. We are also able to facilitate these sales under our own company ethics and guidelines which we are comfortable with. If we sold a motel under another company’s sole agency we are not sure if their ethics would be the same. In our eyes the contract and payment are no different if we sell your property under our own general agency or our own sole agency so why would we treat them any differently. A broker asking you to commit to a sole agency otherwise they will not accept the listing is equivalent to you telling a customer that they can only stay with you if they guarantee not to go to any other motel. We understand it is not binding contracts which build your business but the service and satisfaction you provide which gives you the loyal customers. This forms the basis of John Griffin Realty having the company ethics of using general agencies and not asking for sole agencies.

Factors to be aware of:

Cancellation clauses: What is the ability to cancel the contract and how much notice do you have to give.
If the motel is sold by another agent whilst under sole agency the agency still exists and commission is due to the first agent under the sole agency. If the second seller is also due a commission due to a direct contract with you as the vendor then you could be liable for two commissions.

The information you provide for sale purposes must be accurate and if you know of any defects or happenings which could affect the motel it is your duty to disclose them to a prospective purchaser. If you know of a defect and tell the Broker but then say they can’t pass it on to a prospective purchaser the broker must legally decline the agency.
Commission rates vary. The commission amount must be stated on the agency agreement for both the appraised sale price and the marketed sale price.

Rebates, discounts and other payments for services provided to the client must be disclosed on the agency agreement.

As the vendor you must have authority to sign on behalf of the legal entity which owns the motel.

 

Read more Tips.

Find out more in our news section. More tips to read.

 


 

icon_advice  Motel Industry Advice and Helpful Hints

motel industry adviceEven if you are just looking for industry advice we are still here to help. In John’s role as Consultant to MANZ he will provide you with respected and relevant advice. We will arrange to spend time with you when you are contemplating entering or exiting the motel industry and provide answers and solutions to your queries.

If you are already in the industry and need advice on specific issues or situations in your motel we are here to help. Our experience and knowledge usually brings those big problems back down to size and allows you to plan a path to resolving them.

If your room occupancy is in excess of 70% then you should be looking to increase your room tariffs. This will result in the same cash surplus for less work. A lower occupancy at a higher tariff will produce the same profit. Ask us how.

Do not display a sign of “under new management” or “under new ownership”. This acts as a magnet for undesirable people who may test your skills. They may perceive you as being a new operator who is inexperienced and desperate for custom. Another reason is that the regular customers on seeing that there has been a change in the operator may go to another motel. Often customers stay because of the operator not the motel facilities. If the customers are unaware the motel has changed hands before their first visit to you then you have a chance to win them over on this visit.

Tracking internet advertising. If you have your own domain name you should be able to collect e-mails to the domain with various headers. For example in your advertising with Jasons travel media you could state your e-mail address as Jasons @ Yourdomain.co.nz and be able to pick this up. Then when looking at e-mails you can analyze how your customer found you.

Check out our news articles for further helpful hints. Read News items.