Accounting and Finance (Page 8)

Finance, Taxation, Insurance and Accounting related articles

In our business we spend a lot of time with new clients as they go through the journey of discovery that leads to the decision to purchase an accommodation business. That process can take weeks, months and sometimes years. Because we don’t charge fees to clients we certainly hope that one day they borrow some money and we make a few dollars. However, we have a duty of care to put the clients’ interests rest and if that means helping them to not make a bad decision then so be it. At some point in our work with new clients a suitable asset will beRead More →

Back in the day when I was a bank manager one of the marketing strategies the banks employed from time to time was pre-approved finance for home buyers. Basically we collected information from the client and gave them a letter saying they could borrow up to a certain amount subject to a formal finance application and a full credit assessment. The letter was not a finance approval and carried no obligation on behalf of the bank. In other words it was pretty much useless except that it did give potential home buyers an idea of their likely maximum loan and therefore what maximum purchase priceRead More →

Contributed By: TheOnsiteManager on

According to consultancy firm Capgemini and Royal Bank of Scotland, Australia has the 4th highest rate of non-cash payments on earth, increasing by 7 percent per year. According to the RBA, the average surcharge for Visa / Master Card is 1.9% and 2.9% for American Express. The implications of this, for a business operating on a 10% margin, are staggering. They’re essentially sacrificing 20-30% of their profit just to receive payment. For a motel operating on a 30% margin it’s around 10%. These costs are often simply accepted as part of doing business, but it’s only going to get worse from here. Seemingly overnight, tap-and-go services have become ubiquitous and withRead More →

Contributed By: Mike Phipps Finance on

In the lead up to the GFC if you were upright and breathing and had a deposit you could borrow money. The banks were very excited about the way things were going and not a lot of attention was paid to the capacity of the borrower to successfully operate the asset being purchased. After all, the economy wasgoing gang busters, the miners were having a great old time, what could possibly go wrong ? My, how things have changed !The past few years have seen a steady tightening of credit policy among the banks with particular focus on new entrants to business with management rightsRead More →

What exactly am I buying? Purchasing a management rights off the plan simply means that you are agreeing to purchase a management rights business and usually a managers unit at a future time once the project is  complete and individual unit sales have settled. Off plans can be holiday resorts, permanent rental townhouse or unit complexes or short stay corporate properties like hotels and serviced apartments. How do I know what I am buying? The sale of off plan management rights is a highly regimented process and contract conditions are designed to ensure that the buyer is protected. Most importantly the sale will most likely be subject toRead More →

Contributed By: Mike Phipps Finance on

If you are reading this chances are you are thinking of buying an accommodation business or you already operate one. For the purposes of what I am going to talk about in this article let’s confine our thoughts to freehold and leasehold motels and caravan parks. The object here is to contemplate the various strategies that are worth thinking about as part of the purchase process. Let’s start with the most common transaction we see and that is the purchase of a leasehold. By far the majority of our clients use a company acting as trustee for a discretionary trust. They do this for aRead More →

Contributed By: BMT Tax Depreciation on

Did you know you could be missing out on thousands of dollars in tax deductions by not taking advantage of your depreciation entitlements? The Australian Taxation Office (ATO) allows the owners of income producing properties to claim depreciation deductions relating to the wear and tear of the building structure and the plant and equipment assets it contains. By claiming depreciation, hotel and motel owners essentially will reduce their taxable income, therefore they will pay less cash. What’s more, the fee to obtain a tax depreciation schedule outlining all of the deductions available to be claimed is 100% tax deductible. You could be missing out on:Read More →

As finance industry professionals we deal with banks every day and I suspect take much of what happens for granted. At a recent accommodation industry forum I was a bit surprised when the discussion turned to bank lending policies. It transpired that many operators (and therefore I presume borrowers) in the room thought that the banks solely call the shots on what can and cannot be done when they lend you money. Nothing could be further from the truth. It is true that banks have credit policies and those policies influence and inform the outcome of your loan application. It is also true that withinRead More →

Contributed By: Mike Phipps Finance on

I mentioned in a recent article that when it comes to interest rates I am not a clairvoyant and so it has proved to be. The reasons why will be revealed soon enough but rst a bit of recent history. Until relatively recently banks set their home loan and residential property investment rates in accordance with the Reserve Bank cash rate. That is, if the Reserve Bank dropped the cash rate then residential property rates followed and vice versa. A little while back one of the major banks announced that it would no longer blindly follow the cash rate benchmark and instead make rate decisionsRead More →

Contributed By: Hynes Legal on

We don’t like being negative nellies, but sometimes we do need to talk about the things that go wrong in these newsletters. Alan Greenspan (the then Federal Reserve Chairman in the USA) coined the famous phrase ‘irrational exuberance’ in relation to the dot-com bubble of the late 1990’s, but it could apply to any boom since (and before – even back to the tulip boom of the 1600’s.) If you were to Australianise that phrase it would be along the lines of something being ‘too silly for words’. It is not for a lawyer to talk about risk when it comes to valuations / asset pricing asRead More →