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Management Rights Vs Motels
 

Motel Leases V Management Rights

There is no doubting that the Motels Industry is the closest industry to management rights. It is no surprise then to see motels operators buying rights and vice veras. While there will be people who will strongly defend one industry above the other, the fact is that the decision is as likely to be a lifestyle one rather than a business one. Listed below is are all the variations between the 2 industries. The choice is yours.

Motels + Motels -
  • Motel owners only have to deal with one party regarding decisions about the property not multiple unit owners.
  • Every dollar you take in is yours and you have no end of month accounting to numerous individual unit owners.
  • No trust account auditing.
  • As money is not through a trust account you can take the risk of not declaring all income.
  • With a leasehold going concern, no $ tied up in real estate so every investment dollar is working in the business.
  • Your income stream can not be affected by owners taking units out of the letting pool.
  • No licensing requirement ( and so no training course to do) unless a liquor license is required in the restaurant.
  • Settlement is generally much shorter (aprox 30 - 45 days).
  • Contracts to buy are less complex and are not subject to the buyer being approved by the Body Corporate.
  • Shows a much higher return of aprox 28% (equivalent to a 3.6 multiplier) on the whole investment.
  • Often a more constant income than that experienced by resort management right complexes.
  • Generally longer leases than an Accommodation module.
  • Bigger motels lend themselves to being run under management.
  • If run under management there is no need to live on site and there is certainly no legal requirement to do so as is the case with Management Rights.
  • With no requirement to live on site you can rent/buy an external residence that suits your families requirements.
  • Motels can be easier to resell as the concept of running a motel is easier for many to understand.
  • Lending ratio lower at 50% to 60% for leasehold going concerns as there is no freehold equity to borrow against.
  • Requirement to provide at least breakfast, means the hours are longer.
  • On site restaurants require an additional skill set and lead to still longer hours and staff management issues.
  • You don't have to account to individual owners but you do have a substantial rent payment to make to the freehold owner each month.
  • No guaranteed salary component in income.
  • You have no dollars invested in the capital gains tax free environment of principal place of residence.
  • As accounts aren't through a trust they aren't audited, so its easier to get "burned" when buying.
  • Due diligence requirement to avoid the above are more stringent and expensive.
  • Good earning motels are in regional areas not in capital cities or resort areas (Coast for show bush for dough).
  • If lease runs down to around 15 years the operator has to pay for new lease extensions whereas with management rights the term can be extended at no cost.
  • Operator is responsible for all the maintenance costs and for all fit out upgrades.
  • The operator is more tied to the complex time wise than is the case in resort or permanent complexes.
  • Operator must be careful that the plant and equipment is correctly apportioned in the contract.
  • You can't make an additional income stream by selling units to your clients.
  • Less suitable for inexperienced operators.

 
 




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© Queensland Management Rights Sales Pty Ltd. ABN: 29768420528. Disclaimer: The figures and information displayed on this website are supplied by the owner of the Management Rights Business. While RAAS RIGHTS staff make every endeavour to ensure their accuracy, they usually do not have access to full sets of accounts or legal documentation for verification purposes. Accordingly parties should make their own investigations as to the accuracy of these figures and information