Quick answer
Hotel and motel owners borrow to buy a property or a lease, refurbish rooms, replace air conditioning and laundry gear, and cover quiet seasons. Freehold going concerns are usually financed as commercial property, though lenders lend less against accommodation than against standard commercial buildings. Leasehold motels are valued mainly on net profit and the years left on the lease. Banks are strong here for experienced operators; non-bank lenders help when timing or criteria don't fit.
Key points
- Freehold going concern, freehold only and leasehold motels are three different lending propositions
- A leasehold motel's value rests on its profit and the years left on the lease, so a shrinking lease shrinks what you can borrow
- Lenders often lend at lower ratios on accommodation than on offices or shops, because the property's value depends on the business inside it
- Booking platform payouts, seasonal occupancy and refurbishment cycles all show up in the cash flow a lender reviews
Accommodation is one of the few small business sectors where the property and the business are tangled together so tightly that lenders can’t value one without the other. A motel building in a good location is worth what it is because people pay to sleep in it. Take the trading away and you’re left with a specialised building that only suits one use. That shapes everything about how hotels and motels are financed.
The good news is that lenders understand accommodation well, and experienced operators with steady trading have plenty of options. The trick is knowing which kind of deal you’re actually putting forward.
What exactly are you buying or borrowing against?
Australian motels in particular trade in three distinct ways, and each one goes to a lender differently.
Freehold going concern. You own the land, the building and the business. This is usually financed as commercial property, often by a bank, with the lender assessing both the property value and the trading figures. Expect a lower lending ratio than on an office or shop, because the property is specialised.
Freehold only. You own the building and lease it to an operator. To a lender this is an investment property with a single tenant, so the lease terms, rent and the operator’s track record matter most.
Leasehold. You own the business and a long-term lease, but not the land. There’s no property behind the loan, so lenders value the business on its net profit, usually multiplied by a factor that reflects location, condition and the remaining lease term. Leasehold buyers commonly need a solid cash deposit or extra security, such as equity in their home.
Hotels with bars and gaming add another layer. See our page on pub and bar business loans for how lenders treat licensed income.
Why does the remaining lease term matter so much?
For leasehold motels, the lease is the asset. A buyer is paying for the right to keep earning from that site for a set number of years. When the years run down, the value runs down with them, and so does what a lender will advance.
Most lenders won’t lend for longer than the lease has left to run, including options. A motel with 20 years remaining can support a longer loan with lower repayments. One with six years left may only support a short loan, and the repayments may not stack up against the profit.
That’s why experienced operators negotiate lease extensions well before they need them. Landlords aren’t obliged to extend, but many will, sometimes in exchange for a payment or a rent review. If you plan to refinance, refurbish or sell in the next few years, the lease conversation usually comes first.
How do lenders read accommodation trading figures?
Lenders who know hospitality will look for:
- Occupancy and average room rate by month, ideally over two or three years.
- The guest mix. Leisure travellers, corporate accounts, tradespeople and construction crews, and coach groups all behave differently. A motel relying on one large workforce contract may have strong numbers that could disappear when that project ends.
- Booking platform costs. Online travel agents take a commission, and some pay out after the guest stays. Lenders look at the net income and when it actually arrives in your account.
- Wages and penalty rates. Weekend, public holiday and overnight reception shifts lift costs, and since July 2026 every wage run carries its super contribution with it.
- Repairs and capital spending. Rooms date. Lenders want to see that the property has been maintained, not run down to inflate profit before a sale.
Regional demand data from Tourism Research Australia’s National Visitor Survey can help you show a lender how travel in your region is trending, which is useful context when your own figures have a seasonal shape.
Thinking about a purchase or refinance? Share the basics with us. The enquiry is quick, about a minute, and it isn’t recorded as a credit check.
Which finance fits which job?
| What you need | Usual fit | Notes |
|---|---|---|
| Buying a freehold going concern | Commercial property loan, sometimes with a separate business facility | Banks often strongest; lower lending ratios than standard commercial |
| Buying a leasehold motel | Business acquisition loan, often plus home equity | Lease term and profit drive the amount |
| Room refurbishment (furniture, TVs, air conditioning) | Equipment finance | Secured on the items, keeps cash free |
| Bathroom or building upgrades | Unsecured or second mortgage loan | Fixed improvements can’t be repossessed, so other security is needed |
| Quiet season or a large tax bill | Business line of credit | Draw down in winter, repay in peak season |
| Settlement running late | Short-term property-secured loan | See settlement about to fall over |
Our LVR calculator shows how a proposed loan compares with the property’s value, which is the first number a property lender works out. For a plain-English explanation, see our glossary entry on loan-to-value ratio.
What seasonal and market risks do lenders weigh?
- Peak and off-peak. Coastal motels often fill over summer and school holidays, then quieten. Alpine and northern properties have their own calendars. A line of credit suits that rhythm better than a lump-sum loan.
- Event and project demand. Local festivals, sporting events, mining shutdowns and infrastructure projects can fill a town for a while, then leave.
- Refurbishment cycles. Guests compare photos online. A property that hasn’t been refreshed in years will slide down booking platform rankings, which lenders know.
- Natural disasters. Floods, bushfires and cyclones can close properties and roads. Lenders will ask about insurance, and our page on business loans after natural disasters covers what happens next.
What documents should an accommodation owner prepare?
- Annual accounts and returns for the last two or three years
- Monthly occupancy, average room rate and revenue reports from your property management system
- Business bank statements covering the last six to twelve months
- For leasehold, the full lease including options and review clauses; for freehold, the certificate of title
- Contract of sale and the vendor’s figures if you’re buying
- A list of planned capital works with quotes
- An ATO portal statement and recent BAS
Worked example: refreshing a coastal motel before the lease runs down
An illustrative scenario with made-up figures. An owner-operator couple run a 22-room leasehold motel on the NSW Mid North Coast. Net profit is steady at around $260k a year, but the lease has eight years to run and the rooms haven’t been updated in a decade. Online reviews mention tired bathrooms.
They speak to the landlord first and negotiate a ten-year extension, taking the remaining term to 18 years. With the longer lease in place, they finance $95k of new furniture, televisions and split-system air conditioners through equipment finance, and borrow $140k for bathroom upgrades with a second mortgage over their home. The bank had been interested, but only if the lease extension was finalised and the couple contributed more cash than they wanted to commit.
Within a year the refreshed rooms command better nightly rates, and the longer lease plus improved figures would also support a stronger sale price when the couple eventually retire.
Ready to look at your property’s options?
Hotels and motels reward owners who think a few years ahead: about the lease, the next refurbishment and the quiet months. Lining up the right finance before you need it is part of that.
If you’d like a second opinion on what’s possible, make an enquiry. It’s a quick form, around sixty seconds, and sending it creates no enquiry on your credit report. We don’t sell or broadcast your details across the lending market. Instead, someone who understands accommodation finance reads your enquiry and phones you directly. Real occupancy figures, the true lease term and the exact sum you’re after help us come back with an option that suits your property rather than a guess.
Frequently asked questions
Can I get a loan to buy a leasehold motel?
Yes, but expect a lender to look hard at the lease. Leasehold motels are valued mainly on their net profit, and the remaining lease term, including options, limits how long a lender will lend for. Many buyers combine a business loan with a cash contribution or security over other property.
How much can I borrow against a freehold motel?
It depends on the lender, the location and the trading history. Lenders generally apply lower loan-to-value ratios to accommodation than to standard commercial property, because the building is specialised and its value rests on the business. Strong, steady trading and a good location help.
Do banks lend to hotels and motels?
Yes. Banks are often the cheapest option for an experienced operator buying or refinancing a well-performing freehold property with a sizeable deposit. Some banks have specialist hospitality teams. If the bank says no, or wants more equity than you have, non-bank and private lenders can sometimes help.
How do lenders treat income from booking platforms?
As normal trading income, once it lands in your account. Lenders will look at the net amount after commissions and how quickly platforms pay out. Heavy reliance on one platform or one corporate client is something they may ask about.
Can I finance a motel refurbishment?
Yes. Freestanding items such as furniture, televisions, air conditioners and laundry equipment can often be funded with equipment finance. Building works like new bathrooms usually need an unsecured loan, a property-secured loan or an increase to your existing facility.
What happens if my motel lease is getting short?
A short lease makes it harder to borrow and harder to sell. Talk to the landlord about extending the lease or adding an option before you apply for finance or list the business for sale, as the extra years can noticeably change what lenders and buyers will offer.