How to Buy Hotels and Motels in Canada: A Step-by-Step Guide for U.S. Buyers

Investing in hotels and motels in Canada is an exciting and potentially lucrative opportunity for U.S. buyers. With a strong tourism industry, stable economy, and proximity to the United States, Canada offers a prime market for hospitality investments. Whether you’re looking for a small roadside motel or a large city-center hotel, this guide provides the essential steps for U.S. investors to navigate the buying process confidently.

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Step 1: Research the Market

Understand the Industry

• Canada’s hospitality market benefits from millions of domestic and international visitors annually, with top tourist destinations including Niagara Falls, Banff National Park, Vancouver, and Toronto.
• Post-pandemic recovery has increased demand for accommodations, making now an opportune time to invest.

Identify Key Locations

• Proximity to the U.S. Border: Hotels and motels near border crossings attract both Canadian and U.S. travelers.
• Tourist Hotspots: Cities like Montreal and Calgary, or scenic regions like Whistler and Prince Edward Island, are consistent high-performers.
• High-Traffic Areas: Properties near highways or major transportation hubs often generate reliable occupancy rates.

Analyze Market Trends

• Examine occupancy rates, revenue per available room (RevPAR), and net operating income (NOI) for specific areas.
• Assess growth potential in developing regions or underserved markets.

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Step 2: Set Your Budget and Goals

Define Your Investment Objectives

• Are you seeking long-term cash flow, appreciation, or a mix of both?
• Determine whether you prefer a hands-on role (owner-operator) or a passive investment.

Estimate Total Costs

• Purchase Price: Typically listed in CAD; be mindful of currency exchange rates.
• Operating Costs: Include payroll, maintenance, utilities, insurance, and marketing.
• Taxes and Fees: Consider foreign buyer taxes, land transfer taxes, and legal fees.
• Upgrades: Allocate funds for renovations or updates to maximize appeal.

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Step 3: Find the Right Property

Work with an Experienced Real Estate Broker

Partnering with a knowledgeable Canadian real estate broker who specializes in hospitality properties is crucial. A broker can:

• Provide access to exclusive and off-market listings.
• Help you navigate local regulations, zoning laws, and licensing requirements.
• Assist with property valuation and financial due diligence.
• Negotiate the best deal structure and terms on your behalf.

Choosing the right broker ensures you make an informed investment, avoid costly mistakes, and secure a profitable hospitality property in Canada.

Search Online Listings

• Use platforms like MLS, Home Indexer, or other specialized commercial real estate sites.
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• Evaluate properties based on location, size, and financial performance.

Key Considerations When Evaluating Properties

• Location: Proximity to attractions, transportation, and demand generators.
• Financial Performance: Review profit and loss statements for the last 3-5 years.
• Amenities: Pools, restaurants, conference rooms, and parking can increase appeal.
• Potential for Growth: Look for underperforming properties with room for improvement.

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Step 4: Understand Financing Options

Vendor Take-Back (VTB) Financing

• A common option where the seller finances part of the purchase price, reducing upfront costs.

Cross-Border Lending

• Work with banks that have experience with U.S. buyers investing in Canada.
• Ensure your lender is familiar with Canadian property laws and tax regulations.

Down Payment Requirements

• Down payments for commercial properties in Canada typically range from 20% to 35%.
• Ensure you have enough liquidity to cover this upfront cost.

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Step 5: Conduct Due Diligence

Review Financials

• Analyze revenue, expenses, and profit margins over multiple years.
• Confirm the accuracy of financial statements and seek clarification on any discrepancies.

Inspect the Property

• Hire a professional inspector to evaluate the building’s condition, including HVAC, plumbing, electrical systems, and structural integrity.

Assess the Market

• Understand the local competition and demand trends. For example, are new hotels opening nearby that could impact your occupancy rates?

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Step 6: Understand Legal and Tax Implications

Hire a Canadian Lawyer

• Work with a lawyer experienced in cross-border real estate transactions.
• They will handle contracts, ensure compliance with local laws, and guide you through closing.

Foreign Buyer Taxes

• Be aware of potential foreign buyer taxes, such as Ontario’s Non-Resident Speculation Tax (NRST).
• Research exemptions or ways to minimize these costs.

Ownership Structures

• Consider purchasing through a corporation or partnership to optimize tax benefits and limit liability.

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Step 7: Negotiate and Make an Offer

Price Negotiation

• Use your due diligence findings to negotiate a fair price.
• Highlight any required repairs or upgrades as leverage for a lower price.

Conditions to Include

• Financing approval.
• Satisfactory property inspection.
• Review and approval of financial records.

Make a Deposit

• Be prepared to place a deposit, typically 5-10% of the purchase price, as a sign of good faith.

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Step 8: Close the Deal

Final Inspection

• Conduct a walkthrough to ensure the property is in agreed-upon condition.

Transfer Ownership

• Your lawyer will finalize the contracts and oversee the transfer of title.

Settlement of Funds

• Ensure all payments, including down payment, taxes, and fees, are settled before closing.

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Step 9: Plan for Operations

Management Strategy

• Decide whether you will manage the property yourself or hire a professional management team.
• Research reputable property management companies in the area if outsourcing.

Marketing and Branding

• Develop a marketing plan to attract guests. Leverage online booking platforms, social media, and local partnerships.

Staffing

• Retain or recruit experienced staff to ensure smooth day-to-day operations.

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Step 10: Monitor and Optimize

Track Performance

• Regularly review key metrics like RevPAR (revenue per available room), ADR (average daily rate), and occupancy rates.

Invest in Upgrades

• Enhance amenities or renovate outdated areas to improve guest satisfaction and increase revenue.

Plan for Growth

• Expand your portfolio by acquiring additional properties or upgrading the current property to attract higher-paying clientele.

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Buying hotels and motels in Canada as a U.S. investor is a rewarding opportunity that can generate consistent income and long-term growth. By following this step-by-step guide and partnering with experienced professionals, you can successfully navigate the process and unlock the full potential of your investment.

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If you’re ready to start your journey, contact us today for exclusive listings and personalized advice!

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