Hotel Room Investment – Cash Flow Rental Income


hotel room investment vs rental propertyA hotel room investment can give you a regular passive income together with an exit strategy that can deliver a lump sum profit when you decide to sell up. As an investor you can enjoy the regular, passive rental income along with the lump-sum profit on exit without having to do any work at all – these are truly hands-free investments! As the investor, all you need to do is write the cheque and then sit back and collect your assured returns as everything is fully-managed on your behalf.

This article will consider the basics of a hotel room investment, the advantages that come with such a specialist investment. With a low entry price, regular income, the readily available advice in the market place and research at your fingertips, the risk is low. We will also go over how to mitigate common risks that come with investment in hotel rooms to give you an all-around guide to the hotel investment sector and how it can make you more money on your investments.

Why Investors Are Turning To Hotel Room Investments For Greater Returns & Assured Exit Strategy

A hotel room investment is a great way to turn your savings into a steady income and increase the health of your finances through serviced and fully-managed property whilst retaining and even growing your original lump sum. These investment opportunities make great investments because they can give you an average yield of around 10% each year. If you invest £50,000 into this type of investment, you can expect to receive an annual income of £5,000 from the rental returns which are £600 each month!

Compared to other forms of investment such as an FTSE 100 company shares portfolio (4%), cash deposit accounts (1%) and 10-year gilts (0.95%) these investments offers a much better return than any asset class outside of property investment at this time.

real estate investment vs hotel room investment Returns Compared With Other Investments

In terms of high annual yield, a hotel room can give you great returns on your savings compared to other assets.

In comparison to other types of property investment, when you invest in a hotel it will offer higher returns despite the lower entry requirement. With a regular buy-to-let investment, depending on the area, the NET yields will only be around 7% or less in 2019, and generally the further down south you go the lower the yields due to expensive overheads. This brings us to another advantage of hotel room investment – there are no ongoing or hidden costs – once you have purchased the unit you will not be asked to make any further payments and the assured returns are NET returns which means that no deductions will be made from this income.

Furthermore, when you invest in a hotel, unlike a regular buy-to-let where the property market is a big factor in the profits you can make, a hotel investment doesn’t rely on the trends in the UK housing market. Similarly, the sector doesn’t rely on students coming to the UK like the student accommodation sector. When you invest in hotels it is classed as a commercial property transaction rather than residential and so this means that there is the added advantage of being exempt from stamp duty tax.

Hotel Room Investment – The Best Property Investment of 2019 – 2020

Making a hotel room investment is great for both you, the investor, and the hotel owners because they offer the hotel investor a high-yielding rental income, whilst at the same time giving the owner of the hotel more finance to run their business. The money that gets invested in the hotel will go towards the refurbishment, repairs, maintenance and other essentials, which will also benefit the guests because the standards will be higher.

Your investment returns will come through rental income. This is the money that comes from guests ‘renting’ your room for their holiday. When you invest in a hotel follow the same principles as a buy-to-let in that you buy a room in development to let to tenants, and you make a percentage back each year from the tenant staying in your hotel room.

These specialist investments do not need to be managed by the investor because the property continues to be run by the hotel staff, owners and management company. The repairs and maintenance will also be covered by the management team.

Essentially, as the investor, you will not be responsible for dealing with guests, making repairs, collecting ‘rent’, or advertising for guests – so it requires none of your valuable time. This hassle-free source of income is the perfect opportunity to get the most out of your money instead of having it sitting in a bank where interest rates are low.

Length and Exit Strategy

for cash flow real estate investment invest in hotel rooms and holiday resortsHotel room investments are also fairly long-term. In 2019 the best of these investments will offer up to a 10-year rental cash flow income at around 9% plus their buy-back option of up to 120%.

The very best opportunities will also offer an exit strategy, generally in the form of an assured buy-back option of 110% or more after 5 years. This provides a built-in exit strategy for you with assured appreciation should an investor want to sell to free up cash.

What Are The Advantages Of Buy-To-Let Hotel Rooms Investment?

Low cash and no mortgage requirements – A hotel room investment has a low entry price compared to a regular buy-to-let property. Most people who do invest in a residential buy-to-let, rather than hotels, will either need deep pockets or a mortgage to fund the majority of the investment. According to Nationwide’s House Price Index, the average UK house price in August 2019 was £216,096.

Low Entry Price But No Mortgage Option

No admin required – these kinds of investments are very straightforward because there aren’t any admin or maintenance requirements. As the investor, you buy a room that is registered to you at the land registry. After investing you receive payments from the room every three-months for at least 5 years.

Hotel room investments also don’t have the complicated tax relief rules or associated cost deductions to calculate – as already noted, as a commercial property they are exempt from stamp duty.

Fast results – This kind of investment is also fast. As soon as you complete on the property, you will start to see the money come in from the rental yield. Unlike other investments where the property may need refurbishing, a hotel room investment is usually ready to go as soon as the offer comes to the market.

Diversifying your portfolio – By investing in hotel rooms you can diversify your portfolio. Many investors will focus on residential buy-to-lets and possibly student properties, however, a hotel investment can be a good way to balance your portfolio so that your eggs aren’t all in one basket. Diversification allows you to spread your risks should sectors in the property market experience volatility.

The hotel industry is also independent of the wider residential property market, so, if you are experiencing void rental periods with residential properties, having a hotel room investment in your portfolio can give you the income from investing you need.

Furthermore, with the emerging environmental changes currently underway in so many tourism hubs around the world, the leisure, and tourism industry has been growing, with occupancy rates up, and is forecast to continue to do so.

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