What to consider when investing in hotel rooms
Source: Hotel Management
Considering investing in hotel rooms? It sounds like a great deal—rather than buying a whole property or forming a JV to own a hotel outright, potential investors can buy a room in an upcoming development and collect a percentage of the income generated by that room’s rentals. And that’s it. If everything goes right, it’s a win-win proposition: The project is funded by numerous individual investors and those investors make a tidy income without the mess of partnerships or management responsibilities. (The hotel management company handles the daily operations of the property.) The initial expense can be much lower than buying a full hotel, but the rewards—over the long-term—can be very positive.
The New Nordic Group has some good advice for investors considering buying a hotel room.
Know what type of hotel room investment you need
Professionally managed Midscale hotels and resorts in growing tourism hubs can be a steady source of income, as they are almost always in demand. This implies that its revenue remains stable throughout. “However, the luxury hotel market is usually affected by economic downturns. As such, mid-scale is a more secure hotel investment as compared to the other types”
Know how much you can afford for investing in a hotel room
“A hotel room investment can start as low as $70,000 USD. Also due to the easy payment plans available, one does not usually require loans or mortgages.”
Guaranteed return on investment
Hotel room investments come paired with a guaranteed return on investment. Hotels & resort companies usually offer up to 30% of their hotel rooms to individual investors. This means they would need an occupancy rate of 27% and over to cover returns of up to 10%p.a.
The investor owns the outcome
Owning the outcome means one knows exactly what the investment property will deliver/return during the investment term. This is very important & comforting for investors who like to plan ahead their life.
Know your tax options in your target real estate investment destination.
Real estate and investment taxation options vary greatly across borders. Be sure you know what you’ll have to pay back. “Tax efficiency is a major benefit when it comes to investing in hotels. Since hotels are ranked in the same category as commercial properties, there are many tax-efficient opportunities available which mean additional returns on your investment.”
Know your exit plan
The great thing about investing in hotel rooms is that “You can opt for a buy-back that is guaranteed, as long as your investment is over a certain period of time. With this arrangement, you will sell the property at a profit, on top of the returns you will have made during the entire period.”
Follow the link to learn more about investing in hotel rooms