So despite what some of the moderators may think, some of us have interest or experience in this industry. I'm happy to take you through the process I went through buying a hotel/pub and what I steps I missed/messed up entirely - and you won't even have to PM me for the details. So first step was I was in a position to buy a business to replace my PAYG income (this is commonly referred to as buying a job rather than investing). I scoured Real Commercial for a few months narrowing down some possible purchases based on purchase price and (alleged) annual profit, receiving memorandum's from a number of agents on potential businesses. This was handy as it helped in learning the lingo (leasehold = business, freehold = building etc) and you start to get an idea of what's normal for an industry for revenue, costs, profit etc. Eventually I narrowed the search to a particular pub and was ready to do some on the ground looking. The target pub was centrally located in a regional city and had been operating for around 150 years by this stage, going bust once in the late 90's when it had become a bikie hangout. It was given a makeover and reopened the next year. Including an owners wage of $45k it was making a bit over $100k profit a year and was for sale with a 20 year lease for $300k. Financials were provided which looked like financials to me, so box ticked! I passed these on to a large accountancy firm who agreed that they looked like financials and charged me like a wounded bull for the confirmation. Now when buying a business, banks rarely, if ever, will lend on cash flow. This means you need enough equity or cash to pay 100% of the asking price. I had equity available and organised a business loan X-Coll against residential property. We negotiated a purchase price of $275k and waited for settlement. On settlement day it turned out the seller did not have a 20 year lease to sell, only 15 years. This is a big deal in pubs - you need years on the lease as when it gets down to zero years you either buy more - re-buy the business effectively, or you get kicked out. Tense re-negotiations took place and we agreed on $265k as the new purchase price and settle. The lease contains the standard first right of refusal clause should the building owners decide to sell and a lovely provision that required me to spend $50k on building maintenance within the next few years, whether they were needed or not. The Numbers: Business Revenue $1.5M p.a. Purchase Price $265k ($35k below market value lol) Rent $180k p.a. Lease term of 15 years Tip #1 - Request individual BAS & BAS statements to match to the financials Tip #2 - Request bank statements to match deposits to BAS to financials Tip #3 - Don’t skim read your lease or expect your lawyer to highlight pitfalls Tip #4 - Plan your purchase structure i.e.Pty Ltd, Pty Ltd & Trust, Trust only. If things go bad, they can go bad in a big way so you want any other assets as protected as possible. Tip #5 - Banks don’t lend on cashflow – you need 100% of purchase price in cash or equity Tip #6 - Obtaining business finance is far slower than residential Tip #7 - Consider how many years you are buying and how much extra years will cost providing the freehold owner will even sell them to you (they are not obligated after all) Tip #8 - Have a real plan – what do you want to achieve, in how long, how will you exit Tip #9 - Will the leasehold be sellable with less than 10 years left – how will it affect sell price Tip #10 - You will be stolen from on a regular basis – free booze, free food, cash Tip #11 – Its expensive to operate a pub. Costs are high - such as power for all those fridges and freezers, stock, wages, land tax, rates, rent etc. Tip #12 – If things go bad how protected are you individually? Watch out for Director’s guarantees on everything as the business losses can become your personal losses Tip #13 – Consider if you can avoid credit situations by using C.O.D. – it is easy to spiral out of control when you have staff ordering with no thought for your cashflow or bottom line. With COD every item that comes in is paid for (and inspected) on the spot giving you the chance to say no.