Hotel Room Investment
Hotel room investment is surely becoming the best new strategy for rental investors looking for a secure cashflow & guaranteed capital gains. The hotel industry is booming. The total retail value of the global hotel industry is set to cross USD 500 Billion in 2018. The total revenue of the hotel industry in the USA alone should touch $200 Billion in 2018. In the UK, It’s worth over £40bn annually, with around 45,000 hotels and over 730,000 hotel rooms.
Tourism added £121.bn to the UK’s economy in 2014 and is expected to grow at an annual average rate of 3.8% by 2025. Tourists will need somewhere to stay, so it’s safe to say the industry will be thriving for the foreseeable future.
One of the main selling points of hotel room investments for many investors is the low entry point. A typical opportunity usually starts from around $100,000 USD. It can be more affordable than a buy-to-let property, and you don’t need a mortgage to pay for your investment. Great news if you have bad credit, or would struggle to get a mortgage.
What do I get for my money when I invest in a hotel room?
When you invest in a hotel room, your property is registered to you on the Land Registry. The room is yours, and you start earning an income from day one by leasing the use of the room to the hotel. You receive your income on a recurring basis, most often on a monthly basis.
You can even stay in your room now and then by booking a stay as you usually would. Though remember, you’re buying an investment, not a timeshare.
What’s the difference between a hotel rooms and buy-to-let investment?
Lower entry point and the lack of a mortgage aside, one of the main differences is how you make your money. A residential investment property is great if you’d like to high achieve capital growth, but you need to get in at the right time. If you’re looking for a monthly income, then a hotel room investment with a guaranteed rental yield will be a better option.
It could also be a good idea to balance your portfolio with both hotel room investments and residential property. This would ensure you get the best of both worlds. Speak to your Property Consultant to see if this can work for you.
Are hotel rooms time-consuming?
We refer to hotel rooms as a proper ‘hands-off’ investment as there’s no effort required on your part. All you have to do is invest in your room and start earning income.
We recommend only investing in hotels that are already operational to reduce risks. Choosing an investment that’s owned and run by experienced operators and management teams is vital.
How can the operator pay a guaranteed yield?
Guaranteed yields are possible when an operator has a good strategy. For example, An operator buys a hotel for £1.2m and splits up the rooms. These are then sold for £65,000 to £70,000 per unit, earning the operator around £2m, a £1m profit. The £1m is used to buy a new hotel and continue investing. Yields are paid to investors by using the hotel’s profits.
Click on the link if you wish to learn more about hotel room investments