How to Buy a Hotel in Ontario: Financing Steps Explained

Step 1: Get pre-qualified before you make an offer

Before writing an offer, get a realistic read on maximum loan proceeds using the seller's trailing financials and STR data. Because hotel loans are sized off NOI and DSCR rather than purchase price alone, a pre-qualification tells you what down payment you'll actually need — often 35%-50% of going-concern value depending on flag and lender appetite — before you're contractually committed.

Step 2: Structure due diligence conditions correctly

Ontario hotel purchase agreements should include financing, franchise transfer approval, and property condition conditions running concurrently, not sequentially, because each can take 30-45 days on its own. A franchisor transfer application typically requires a PIP inspection, and lenders will not finalize terms until they know the size of any required PIP spend.

Step 3: Order the going-concern appraisal early

The going-concern appraisal is usually the longest lead item in the file, often 3-5 weeks, because the appraiser needs trailing operating statements, a site inspection, and comparable transaction data. Ordering it the same week you go firm — rather than waiting for full financing approval — keeps your closing date realistic.

Step 4: Line up equity and understand seller financing options

Down payment sourcing matters as much as the mortgage itself.

• Conventional lenders typically require 35%-50% cash equity depending on flag and asset quality
• Vendor take-back (VTB) financing behind a first mortgage can bridge part of the gap, subject to lender consent
• Private second-position financing is sometimes used short-term where a strong take-out is already lined up

Step 5: Match the lender to the deal stage

A stabilized, flagged, cash-flowing hotel purchase fits institutional term debt well. A transitional purchase — flag change, renovation, or first-year ramp-up — is better matched to an alternative or private lender initially, with a plan to refinance into institutional debt once 12-24 months of stabilized operating history exists.

Step 6: Budget for closing costs beyond the mortgage

Buyers frequently underestimate ancillary costs: Ontario land transfer tax, franchise application and transfer fees, PIP escrow holdbacks, FF&E inventory adjustments, and working capital to fund payroll and deposits before revenue ramps. Building a 3%-5% contingency on top of the purchase price into your equity plan avoids a scramble at closing.

Step 7: Plan your first 24 months of operations

Lenders reviewing your file — and any future refinance — will look at how the first two years of ownership perform against the underwritten pro forma. Building a realistic ramp-up budget, keeping FF&E reserves funded at 3%-5% of revenue, and maintaining clean monthly financials from day one makes your eventual refinance or expansion financing far easier to arrange.

Frequently asked questions

What down payment do I need to buy a hotel in Ontario?

Most conventional hotel purchases require 35%-50% equity, translating to roughly 50%-65% LTV from the lender. Weaker operating history, independent flags, or secondary locations typically push the equity requirement toward the higher end of that range.

Can I buy a hotel in Ontario with no hospitality experience?

It's possible but harder to finance conventionally; lenders often ask for a professional management company or an experienced operating partner if the buyer has no direct hotel management background, especially for full-service or flagged properties.

How long does a hotel purchase take to close in Ontario?

Plan for 60-90 days from firm offer to closing once financing, franchise transfer approval, and the going-concern appraisal are all accounted for. Rushed timelines usually mean private bridge financing to close on schedule with a later refinance into permanent debt.