Freehold vs Leasehold Motels in Australia

The two tenure structures

Almost every motel listed for sale in Australia is offered as either a freehold going concern (you own the land, buildings and business) or a leasehold (you own the operating business and pay rent to a separate landowner under a long lease, typically 25–30 years with options).

Freehold going concern

• You own the real estate — full capital growth upside.
• Higher entry price: typical regional motels start around $1.5M and rise.
• No rent, so net profit is higher; but stamp duty applies on land value.
• Financeable at ~60–65% LVR through commercial motel lenders.
• Exit options: sell as freehold going concern, split the lease and sell leasehold, or wind-up and redevelop.

Leasehold

• Lower entry price — many leaseholds sit under $1M, making them the primary path for sub-$1M investors.
• You buy the business, plant, equipment and the balance of the lease term.
• Rent is typically 25–33% of achievable room revenue; watch the rent-to-turnover ratio closely.
• No land capital growth; your value grows through trading uplift and remaining lease term.
• Rent reviews (CPI, market, or fixed) and lease-end risk are the two big variables to price in.

Returns and risk at a glance

Freehold going concerns generally trade at yields of 8–12% on net profit; leaseholds trade higher, typically 25–40% return on investment, reflecting the shorter effective ownership horizon and the absence of land.

Which suits a sub-$1M buyer?

Under $1M, leasehold is the realistic entry point in most Australian markets. Freehold at that budget is limited to very small regional properties (under 10 rooms) or distressed sales — exactly the pre-market signals Motel Hunter is built to surface.

Due diligence checklist

• Verified P&L for the last 3 years, with a manager wage add-back.
• Occupancy, ADR and RevPAR benchmarks against comparable regional motels.
• Liquor licence status (if applicable) — surrenders are a leading distress signal.
• Council rates and any outstanding debt recovery filings.
• Lease document (for leaseholds): remaining term, options, rent review mechanism, permitted use.
• ASIC search on the vendor entity for external administrator or wind-up notices.