How to Buy a Childcare Centre in Australia: Step-by-Step Guide

Buying a childcare centre is one of the most rewarding — and complex — business acquisitions you can make in Australia. The sector is underpinned by government subsidies, growing demand, and long-term demographic tailwinds. But the process is unlike buying a café or a retail shop. Regulatory approvals, lease structures, staffing ratios, and occupancy dynamics all shape the deal in ways that catch first-time buyers off guard.

This guide walks you through the entire buying process, from initial search to settlement day, based on what we see working (and failing) in real transactions.

Step 1: Define What You Are Actually Buying

Before you start browsing listings, get clear on the type of acquisition. Childcare centre purchases fall into three broad categories:

Leasehold business only — You buy the operating business (goodwill, enrolments, staff, equipment) and take an assignment of the existing lease. You do not own the building. This is the most common transaction type, typically ranging from $500,000 to $3 million depending on location and occupancy.

Freehold plus business — You buy both the property and the operating business. This suits investors who want the rental income security of owning the building and the operational upside. Freehold childcare properties have traded anywhere from $2 million to over $10 million in recent years, depending on the market.

Freehold investment only — You buy the property with a childcare tenant in place and collect rent. No operational involvement. This is a passive investment, valued using capitalisation rates rather than EBITDA multiples.

Each of these has different risk profiles, financing structures, and return expectations. Knowing which one you want before you start looking will save you months of wasted effort.

Step 2: Search and Shortlist

Childcare centres come to market through specialist brokers, commercial real estate agents, and occasionally through private sale. Unlike residential property, many childcare transactions happen off-market — sellers want confidentiality to avoid unsettling staff, parents, and competitors.

When evaluating a listing, look at these factors first:

Location and demographics — Is the centre in a growth corridor? What is the child population density within a five-kilometre radius? Areas with young families, new housing estates, and limited competing supply command stronger valuations. The Australian Bureau of Statistics (ABS) publishes population projections by local government area (LGA), which is the starting point for any location analysis.

Approved places and licence capacity — A 60-place centre and a 120-place centre are fundamentally different businesses. Check the service approval for the maximum number of children allowed, broken down by age group. The approved capacity is your revenue ceiling.

Lease terms — For leasehold acquisitions, the remaining lease term (including options) is critical. Buyers and lenders both want to see at least 10–15 years of remaining tenure. Anything less compresses the business value and makes financing harder.

Step 3: Understand the Valuation

Childcare businesses in Australia typically trade at three to five times adjusted EBITDA, according to industry transaction data. But the word “adjusted” carries enormous weight.

The EBITDA figure on a centre’s profit and loss statement almost never represents what a buyer should model. Owner salaries above market rate, personal expenses run through the business, rent that is above or below market, one-off maintenance costs, and unusual CCS (Child Care Subsidy) income patterns all need normalising before you arrive at a true earnings figure.

The multiple you pay depends on several factors:

• Occupancy — A centre running at 90%+ occupancy commands a higher multiple than one at 65%.
• Lease security — Longer remaining lease terms support higher multiples.
• Location — Metropolitan centres in high-demand areas trade at premiums over regional sites.
• NQF rating — Centres rated “Exceeding” under the National Quality Standard (NQS) by ACECQA are more attractive to buyers and often justify a pricing premium.
• Age mix — Centres with strong enrolment in the 0–2 age group (which carries higher fee rates) tend to produce better margins.

Step 4: Conduct Due Diligence

Due diligence on a childcare centre covers more ground than a standard business purchase. Beyond the financials, you need to investigate regulatory compliance, physical condition, staffing, and operational risk.

Financial due diligence — Request at least three years of profit and loss statements, BAS returns, CCS reconciliation reports, and debtor ageing. Verify enrolment numbers against actual attendance records — the gap between enrolled families and families who actually attend tells you about revenue reliability.

Regulatory compliance — Obtain the centre’s most recent NQF assessment and rating from ACECQA. Check for any compliance notices, enforcement actions, or conditions on the service approval. A centre with a “Working Towards” rating on staffing or safety may require immediate investment to bring up to standard.

Lease review — Have a commercial lease specialist review the lease in detail. Key items include rent escalation mechanisms (CPI, fixed, or market review), make-good obligations, permitted use clauses, assignment and subletting rights, and any landlord consent requirements for the sale.

Physical inspection — Engage a building inspector experienced with childcare facilities. Check for compliance with the National Construction Code, fire safety systems, outdoor play space requirements (a minimum of 7 square metres of unencumbered outdoor space per child under the National Regulations), fencing, and kitchen facilities.

Staffing — Review staff contracts, qualifications, and tenure. Under the National Regulations, every childcare service must have a qualified Educational Leader and meet specific educator-to-child ratios (1:4 for children aged 0–2, 1:5 for 2–3, and 1:10 for 3–5 in most states, according to ACECQA). Staff continuity matters — a mass departure after settlement can devastate occupancy.

Step 5: Secure Your Regulatory Approvals

This step is unique to childcare and catches many buyers off guard. You cannot simply buy a childcare centre and start operating the next day. Two regulatory approvals are required:

Provider Approval — Under the National Quality Framework administered by ACECQA, any entity that operates a childcare service must hold a current Provider Approval. If you do not already have one, you will need to apply to your state’s regulatory authority. The application involves completing modules through the ACECQA Learning Management System, passing a fit and proper person assessment, and demonstrating an understanding of the National Law and National Regulations.

Service Approval Transfer — The Service Approval is attached to the specific childcare centre (not to the operator). When you buy the business, the existing Service Approval must be transferred from the seller to you. According to ACECQA, the seller and buyer must jointly notify the regulatory authority at least 60 calendar days before the intended transfer date. The regulatory authority is taken to have consented unless it intervenes within 28 days of the transfer date. Parents must also be notified at least seven days before the transfer takes effect.

Step 6: Arrange Financing

Financing a childcare centre purchase is different from financing residential property. Lenders assess the business’s cash flow, occupancy history, and lease security alongside the property value.

Loan-to-value ratios (LVR) typically range from 60% to 70% for childcare acquisitions, meaning you will need a deposit of 30–40% of the purchase price. Some specialist lenders offer higher LVRs for strong operators with proven track records.

Interest rates for childcare commercial loans currently range from approximately 5% to 8% through major banks and specialist lenders, with terms typically spanning three to ten years.

What lenders want to see:

• At least two years of profitable trading history for the centre
• Occupancy above 75% (ideally above 85%)
• A lease with significant remaining tenure (10+ years including options)
• Your Provider Approval (either existing or in progress)
• A clear business plan showing how you intend to maintain or grow the centre

Step 7: Exchange, Settlement, and Transition

Once due diligence is complete, financing is approved, and regulatory approvals are in place, you move to exchange of contracts. The contract will typically include conditions precedent covering finance approval, satisfactory due diligence, landlord consent (for leasehold), and regulatory approval for the service transfer.

Between exchange and settlement, work with the seller to plan the operational handover. Key transition tasks include:

• Notifying parents and staff of the ownership change (as required under the National Regulations)
• Confirming all staff contracts will transfer under the existing terms
• Arranging insurance — public liability, professional indemnity, and building insurance
• Setting up your CCS system access with the Department of Education
• Establishing banking, payroll, and supplier accounts

On settlement day, the business (and property, if freehold) transfers to you. The Service Approval transfer takes effect on the date specified in the notification to the regulatory authority. From that moment, you are the approved provider responsible for the centre’s compliance, staffing, and operations.

The first 90 days after settlement are critical. Maintain stability — keep existing staff, honour parent expectations, and resist the urge to make dramatic changes before you understand the centre’s rhythms. Centres that lose families during a transition rarely recover that occupancy quickly.

How the Pieces Fit Together

Buying a childcare centre is a multi-layered process, but each step builds on the one before it. Get the fundamentals right — understand what you are buying, value it properly, investigate it thoroughly, secure your approvals early, and finance it conservatively — and you are setting yourself up for a strong acquisition.

Looking to buy a childcare centre? Talk to ChildcareLink for a confidential discussion about what’s available and what it’s really worth. Visit childcarelink.com.au or contact our team directly.

Sources

• ACECQA — National Quality Framework; Provider Approval; Service Approval transfer requirements
• Australian Bureau of Statistics — population projections by LGA
• Industry transaction data — EBITDA multiples (3–5x range for Australian childcare businesses)
• National Regulations — educator-to-child ratios and outdoor space requirements
• Specialist childcare finance market data — LVR ranges and interest rates

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. ChildcareLink recommends seeking independent professional advice tailored to your specific circumstances before making any business or investment decisions.