The decision to buy a leasehold or freehold motel is one of the most important choices an investor or owner-operator will make in Australia's accommodation sector. With regional tourism seeing a steady upswing and motels becoming increasingly popular with both families and business travellers, understanding the difference between these two ownership models is essential before diving in.
So, what's the better buy in today's market? The answer depends on your goals, risk appetite, and access to capital.
What is a Leasehold Motel?
A leasehold motel means you're buying the rights to run the business — not the land or the buildings. You pay the landlord (often the freehold owner) rent, usually under a long-term lease that might range from 10 to 30 years, with options to extend.
Pros of Leasehold:
-
Lower upfront cost: You don't need to fork out millions to own the land.
-
Faster ROI: Since the initial investment is lower, you may recoup your money quicker.
-
Easier entry: Ideal for first-time buyers or experienced hospitality professionals wanting to operate without owning real estate.
Cons:
-
You don't own the asset: If the property increases in value, that benefit goes to the landlord.
-
Lease conditions apply: You must follow the lease terms, which may include rent increases and restrictions on renovations or subleasing.
-
End of lease uncertainty: If you can't renew the lease or the terms change, it could impact your long-term plans.
What is a Freehold Motel?
Buying a freehold means you own both the property and the business. This is often referred to as “freehold going concern” in the motel world. You control the land, the buildings, and the operation.
Pros of Freehold:
-
Full control: You're not dealing with a landlord or limited by lease terms.
-
Capital growth: If the property appreciates, you gain from both the business and the real estate.
-
Security: Ideal for long-term investors who want full ownership and asset backing.
Cons:
-
Higher entry cost: Buying the land and buildings significantly increases the upfront capital needed.
-
More complex finance: Banks may require a higher deposit and stricter lending criteria.
-
Higher risk: If the business doesn't perform well, you're still holding the property costs.
What Are Buyers Choosing in 2025?
Right now in Australia, we're seeing growing interest in leasehold motels, especially in regional and coastal towns. This is largely driven by:
-
Lower capital requirements
-
Improved domestic tourism
-
Buyers wanting a “hands-on” lifestyle business without owning real estate
That said, freehold investments still appeal to buyers with deeper pockets, particularly those looking for passive income through leasing the business out, or building long-term value through land appreciation.
Which One's Right for You?
If you're looking to build a business with lower financial risk and plan to actively manage it, leasehold could be the better fit. If you're more focused on long-term capital growth and want the security of owning property, freehold might make more sense.
The key is to match the structure with your financial position, personal goals, and exit strategy. Many successful motel owners start with leasehold and later transition to freehold as their confidence and capital grow.
Final Thoughts
There's no one-size-fits-all answer. The smartest buy isn't about leasehold or freehold — it's about choosing the model that fits your situation, your goals, and the market opportunity. Get expert advice, do your due diligence, and take the time to understand what you're buying.
Whether it's a leasehold in a bustling highway town or a freehold in a quiet coastal spot, motels in Australia remain a strong opportunity in 2025 and beyond.
