I am looking at buying the freehold of a hotel and would like to know what the maximum LVR is with the hotel as the stand alone security?

Hi Sid,
It will depend very much on the lender as to what the max LVR is likely to be.
One example is that a freehold on a gaming facility can go up to 65% whilst the freehold for a pub with no gaming is only 50%
If you have a commercial broker they should be able to guide you further and will have a few options from Majors to specialist lenders.
If you would like me to assist you further with this feel free to contact me at any time
Regards
Scott

Sid

Banks will tend to finance a hotel on an earnings multiple rather than LVR.

Depending on the quality of management, the gaming revenues (machine entitlements) and other unique factors around the hotel - they will all have a bearing on multiple the bank will feel comfortable with. Another factor is the location - metro (and that will have a number of subsets (especially in Sydney for example) which govern poker machine entitlements), outer metro and rural.

If you are buying a freehold pub with a manager in place with a lease - you should be looking at capitalization rates no less than 8% and probably more like 10% and above outside of Sydney.

To really understand your options I would suggest you speak to a speciality hotel broker and/or talk to your finance broker/banker to seek out the assistance of a valuer who specializes in hotels.

Hotels are at the top of the cycle at the moment so if you are going to buy one I would be looking at as little gearing as you can get away with at the moment.

I wish you all the best and look forward to having a beer in your pub some day soon.

Regards
Adam Huxley

generally it's about 60%. these are not the father of the month with lendors at the moment as quite a few have failed but if the numbers are right and there is good quick cashflow and profit from the business then it's likely to get approved. The other key aspect will be the experience of the owners and the management in running hotels successfully.