Many factors come into play when determining the return on investment (ROI) for a financial asset such as a motel.
The expected return on an investment that you are considering purchasing will be an important part of your decision about whether to proceed or not. It is often difficult to estimate ROI, and you will need to carefully research the properties that are available to you.
ROI for motels varies widely and is based on factors that are influenced by the market in which they are operating. Resortbrokers.com.au, a property specialist, recognises that there are specific factors that affect the ROI, and when both buyer and seller understand these considerations, they can agree on a mutually beneficial sale.
The following criteria can influence ROI:
The Condition of the Property
Buyers do not usually want to purchase motels that are in a poor state of repair, or which are old and have not been maintained properly. Such businesses are often uncompetitive and/or unprofitable, and this, together with the high renovation costs, can affect the property’s ROI. Well-maintained businesses, on the other hand, can attract premium prices.
Where the Property is Located
Buyers should consider several factors when deciding where to invest. Investing in a popular area such as on the riverfront, beachfront, town centre or even the highway may lower the ROI because of the relatively high cost of land which equates to a high purchase price, On the other hand, businesses in these areas tend to be more profitable and have a higher turnover than businesses in areas with cheaper land prices. This raises the potential ROI. Generally, it makes sense to invest in a safe location which has a good infrastructure, a range of services, and access to landmarks popular with the motel’s target market. Investments in such areas this tend to offer a better ROI than purchases in less well-connected areas.
The Lifestyle You Would Like to Have
Lifestyle considerations are very important. Does a motel fit the lifestyle the buyer wants? If it does, a lower ROI might be an acceptable sacrifice to achieve a chosen way of life.
Motel investments can be tricky, but with a proper understanding of the factors above, investors and property managers will be able to make the right choice.Tags: hospitality investment, motel ROI, property condition