Buying a Motel: A Practical Guide to Avoid Costly Mistakes
Last Edited 04/01/2026.
Introduction
Buying a motel can be a rewarding business move — but it is not a passive investment.
Behind the glossy listing photos and optimistic profit figures are real operational risks, cash flow pressures, and market realities that many buyers only discover after settlement.
This guide is written to help you think like an operator, not a tourist.
At the end of this page, you can download a free Motel Buying Checklist to help you assess opportunities properly before committing. 1. Understand What You’re Actually Buying
1. Understand What You’re Actually Buying
Not all motel purchases are the same. Before you look at price, you need clarity on the structure.
Freehold going concern: land, buildings, and business
Leasehold motel: business only, operating under a lease
Management rights: contract-driven, service-focused businesses
Each has different:
Risk profiles
Finance considerations
Long-term control and exit options
Many buyers underestimate how much lease terms, rent reviews, and remaining lease length can affect a leasehold motel’s true value.
2. Don’t Trust the Numbers at Face Value
Motel financials are often presented with “add-backs” that flatter profitability.
Common examples include:
Owner wages removed
Family labour not costed
Deferred maintenance excluded
Personal expenses run through the business
Before relying on any profit figure, rebuild the numbers as if:
The motel were manager-run
All work was properly paid
Maintenance was ongoing, not deferred
If the deal only works with optimistic assumptions, it’s not a strong deal.
3. Market Trends: One-Off Spike or Permanent Demand?
A recent jump in occupancy or room rates should always raise a question: why?
Short-term drivers often include:
Post-COVID travel rebound
Temporary worker accommodation
Infrastructure projects
Competitor closures
Natural disasters or displacement
Long-term demand is usually driven by:
Population growth
Hospitals, airports, logistics hubs
Permanent industry expansion
Reduced accommodation supply
If the seller cannot clearly explain the cause of growth, assume it may not last and value the motel conservatively.
4. Is the Market Growing or Shrinking?
A motel can perform well even in a declining town — temporarily.
Before buying, assess:
Population trends
Major employers expanding or leaving
New hotels, motels, or worker camps planned
Tourism seasonality vs year-round demand
Strong performance in a shrinking market is harder to sustain long term and should be priced accordingly.
5. Are the Rates Right for the Town?
Room rates should always be viewed relative to comparable motels, not in isolation.
Ask:
Are rates higher or lower than similar properties?
Is occupancy being sacrificed for higher rates?
Are low rates masking quality or review issues?
The strongest position is usually:
Mid-to-upper pricing
Supported by solid reviews
With stable, repeatable demand
6. Restaurant “Upside” Is Often Overstated
Motel restaurants are frequently promoted as an opportunity, but in many regional towns they are not viable.
If there is a strong local pub or quality restaurant nearby, motels often struggle to compete on:
Food quality
Pricing
Staffing efficiency
Atmosphere
In many cases:
Breakfast-only service
Or partnerships with local venues
are more profitable than full food operations.
Treat “huge upside by reopening restaurant” claims with caution.
7. Seasonality and Cash Flow Matter More Than Profit
One of the most common mistakes buyers make is underestimating seasonality.
Annual profit can hide:
Several months of weak cash flow
Fixed costs that don’t reduce with occupancy
Emergency repairs arriving at the worst time
If you are buying or settling in low season, ensure you have:
3–6 months of fixed operating costs
A separate emergency repair buffer
Cash flow, not profit, is what keeps the business alive.
8. Inspect Like an Operator, Not a Guest
A proper inspection goes beyond cleanliness.
Check:
Hot water capacity and recovery
Air-conditioning age and servicing
Bathrooms for waterproofing failures
Linen systems and laundry setup
Roofs, drainage, and carparks
Noise issues and door seals
Deferred maintenance becomes your problem the day after settlement.
Download: Free Motel Buying Checklist
Buying a motel involves dozens of decisions and documents. Missing just one can be costly. Download our free checklist below:
Enter your email to receive a practical, step-by-step checklist covering:
Financial verification
Market assessment
Due diligence documents
Physical inspection points
Cash reserve planning
Red flags to watch for
Final Thought
Buying a motel can be an excellent business — but only if you buy with clear eyes, conservative assumptions, and adequate cash buffers.
The best buyers don’t chase upside.
They protect downside first.
Disclaimer
The information provided on this page and in the accompanying Motel Buying Checklist is for general information and educational purposes only.
It does not constitute financial advice, legal advice, accounting advice, or real estate advice, and should not be relied upon as a substitute for professional advice specific to your circumstances.
Buying a motel involves financial risk and requires independent due diligence. Before making any purchase decision, you should seek advice from appropriately qualified professionals, including (but not limited to) a licensed accountant, solicitor, valuer, finance broker, and building or compliance specialists.
While every effort has been made to ensure the information is accurate and practical at the time of publication, Motel Coach makes no representations or warranties regarding the accuracy, completeness, or suitability of the information for any particular purpose.
To the maximum extent permitted by law, Motel Coach disclaims all liability for any loss, damage, or expense incurred as a result of reliance on the information provided.
Use of this content indicates your acceptance of this disclaimer.
