Finance question
Can I get finance to buy a childcare centre?
Yes. A childcare purchase is really two deals, the operating business and the freehold under it, and lenders treat them differently. Freehold going concerns indicatively fund to around 70% of valuation, leasehold operations at 40 to 60% depending on the lender, subject to assessment. The business layer is priced on earnings quality and occupancy history.
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The short answer
Occupancy is what the lender prices
A childcare purchase can mean two different things, the operating business or the freehold investment under it, and they are priced on different logic. The business is priced per licensed place and on earnings. Our guide puts strong metro catchments at $30,000 to $45,000 a place and regional centres at $15,000 to $25,000, with owner-operated centres at 1.8 to 2.9 times earnings and professionally managed ones at 2.9 to 4.5 times plus (childcare guide). Live examples there run from a 46-place inner-Melbourne centre at $375,000 to a 110-place centre at $3m, and investment freeholds go above $8.5m.
Occupancy moves the price more than any other number. Above 85% earns premium pricing, and below 75% gets discounted. Lenders read it the same way, because the loan is repaid from the centre's income, so ask the vendor for occupancy by room and by month rather than one headline figure. A freehold going concern is classic property lending, with the business layer priced on earnings quality and occupancy history. A leasehold has only the business and the lease to lend against, which is why it is funded more cautiously.
Buying a centre also means moving regulated approvals, so ask the vendor's adviser early what has to transfer to a new owner and in what order, and put those dates beside your finance clause. Most operators enter by buying or leasing rather than building, and the guide shows why: a purpose-built centre costs $19,000 to $34,000 per approved place to construct before land, plus $150,000 to $400,000 of loose fitout, which makes a 100-place build a $2m to $3.5m project before land. Where the deposit is the sticking point, equity in property you already own is the usual bridge. Ventas is a broker across 40+ lenders, with no upfront fee to you.
Do you qualify?
What a lender looks at on a childcare purchase.
Occupancy history
Above 85% is premium territory, below 75% is discounted.
Earnings quality
Whether a manager runs the centre or the owner does shapes the multiple.
Freehold or leasehold
The land and building lend very differently from a lease.
Operator experience
Lenders weigh sector experience and who will hold the approvals.
Why the two layers fund differently
Freehold is property lending
The land and building secure a large share of the price.
The business is earnings lending
Priced on occupancy and the quality of the income.
Equity bridges the gap
Property you already own can cover the deposit.
A worked example
A buyer takes an 80-place leasehold centre in a strong metro catchment at $35,000 a place, so $2.8m, with occupancy at 88%. Suppose the lender advances 50%, which is $1.4m. The $1.4m gap is covered by $500,000 of savings and $900,000 of equity in an investment property. The vendor's room-by-room occupancy records go in with the application. Illustrative only.
Common questions
Frequently asked questions
How much deposit do I need to buy a childcare centre?
Lenders indicatively advance up to around 70% of valuation on a freehold going concern, so plan on roughly 30% plus costs. On a leasehold they advance 40 to 60% depending on the lender, so the deposit is the rest.
Does occupancy affect whether I can get finance?
Yes. Occupancy sets the price and the lender's confidence in the income. In our guide, above 85% earns premium pricing and below 75% gets discounted.
Is it cheaper to buy a centre or build one?
Most operators buy or lease. Our guide puts construction at $19,000 to $34,000 per approved place before land, plus $150,000 to $400,000 of loose fitout, so a 100-place build is a $2m to $3.5m project before land.
Can I fund the business and the freehold together?
Yes. They can be one facility or two. The freehold funds as property lending, the business on earnings and occupancy, and equity in other property can cover the gap, subject to lender assessment.