Things You Need To Know If You Invest In Hotels
While there are so many ways in which you can invest your cash and get good returns, very few people have given the idea of investing in hotels for business a thought. Most of you have heard of real estate, but the first thing that comes to your mind when you come across that name is homes or apartments. Those that have already invested in high-end hotels are making good returns and enjoying their easy money. There will always be people coming to relax during holidays, have fun, and spend their vacation the best way they can. However, it all involves planning. You cannot just wake up one day and decide that you are going to invest all your savings in real estate, a hotel to be precise. There are some critical aspects to note which include:
Think of funds and asset management
Are you good enough to manage your funds and assets? Do you have what it takes to increase the value of your investment while minimizing the expenses? This task is best if handled by professionals, and that is where real estate fund and asset management experts come in to advise you. The experts know what needs to be done to add value to your investment by incorporating property-level strategies, managing expenses, and even leasing your properties.
Understanding the economy and your competitors
Hotel and leisure investment is highly dependent on tourist trade. You need to consider how well the economy is doing, as this will give you an insight into what to expect. Understand the market and how it will affect vacation rentals, which are your biggest competition.
Consider the local demand
You need to have an insight into the local demand and demographics that would require the services of the hotel. If you intend to invest in a luxury hotel, you must ensure that it is located in an area that will attract people of that exact class. Ensure that it is surrounded by full-service amenities where visitors will feel comfortable staying.
The worst mistake you can make when starting a business is going in undecided. You are about to make a significant financial decision, and you cannot afford to make any mistake whatsoever. You need to be sure that real estate is what you are cut out for rather than going, only to end up in regrets. If you are undecided, get the help of a life coach and let the experts advise you on the way forward. A professional life coach can help you overcome your fears and embark on your journey towards reaching your goals. Hotel investment is the best choice, especially for retirees and all-busy individuals in need of regular cash flow but have no time to manage their property. You should, however, ensure that you are well prepared for it and be sure that it is the right thing for you. Do not rush into making a decision without considering how it will impact your finances.
In the current times, there are many ways to invest your cash, but not many people have heard of investing in hotels. What you should know is that some investors are serious about investing and are now making good returns investing in impression modern ultra-high end hotels. If you have been looking for an excellent investment vehicle to put your hard earned money into, then you should look into hotels. Conventionally, the only investments that people thought about were stocks, bonds, and real estate, but now you can put your money into hotels and get good returns. For those looking for the best way to have their money work for them, then maybe it is time you try hotels. However, before looking for a hotel to invest in, you need to consider these points.
Capital/ Initial Investment
When making investments, the amount of capital you have to invest in is crucial. Making sure you have the required amount of money to deposit as your initial investment capital in a hotel is not only essential but necessary. However, you should also know that investing in a hotel is not complicated or too demanding to require a huge amount of money as your initial investment. You can approach the various hotels that are looking for investors and inquire about the minimum investment capital needed.
Loans and Funding
If you lack some cash to deposit as your initial investment or capital, then you need to find ways to request for a loan from a bank. However, you can also talk to the developer and inquire about financial help or backing. In the current times, you can easily find a hotel developer who can give you an interest-free loan. However, you need to be qualified to get this loan.
The main aim of investing your cash on anything is to get good returns. Therefore, you need to know the average returns that you should expect to get from your initial investment. What makes investing in hotels more attractive is that you can get annual returns that exceed five percent. Therefore, instead of your money lying in the bank, you should invest it in hotels.
Conventionally, people used to think that they have to invest in a hotel that is in their country, but this is not the case. Now you can efficiently invest in a hotel that is located in other booming cities in the world.
Hotel Room Investment – Regular Rental Income
A 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.
Hotel Investment – 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 is £600 each month! Compared to other forms of investment such as a FTSE 100 company shares portfolio (4%), cash deposit accounts (1%) and 10-year gilts (0.95%) a these investments offers a much better return than any asset class outside of property investment at this time.
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 mean 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 Utah housing market. Similarly the sector doesn’t rely on students coming to the Utah 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. Making a hotel room investment is great for 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 follows the same principles as a buy-to-let in that you buy a room in a 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 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
Hotel room investments are also fairly long-term. In 2019 the best of these investments will offer a 5 year rental assurance at around 10% NET. However the term can last for 10 years or longer as the investor legally owns the room (purchases will come with a title deed), which mean the investor can continue to receive a rental income of around 10% or more of the purchase price until they decide to sell it on. 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.
No admin required – these kinds of investments are very straightforward because there isn’t any admin or maintenance requirement. As the investor, you buy a room which 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 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.
Hotel Room Investment – How To Avoid Any Possible Risks
Not a quick win (very little capital appreciation) – Hotel investments are generally suited to long-term investors, which is why they have assured rent for up to 5 years. Traditional buy-to-lets will have rental income as well as capital appreciation to make profits from, but hotel room investments aren’t known for their capital appreciation, although an investment with an assured buy-back will give you a reasonable level of capital appreciation – probably more than a residential property in the current market.
The location (it does matter) – The location is very important because it needs to be in an area where visitors are willing to stay in a hotel. There should also be a thriving tourist attraction near the hotel to attract guests to the area in the first place. Hotel room investments are investments in a property and also in a business, so you need to think about the ‘customers’ as well as the demand in the area of the hotel.
There will be competition – When investing many people disregard the possible competition that they may be facing if they pick a hotel room investment in a certain area. Similar to residential buy-to-lets in London and even Manchester, the competition is becoming fiercer because the supply of properties for tenants to rent is over-saturated in some areas. As a result, tenants have so much choice, they may not even see your property as an option.
What Competition Exists In Hotel Property Investments
For buy-to-lets, the competition will affect the rental yields over time, but hotel rates generally stay steady and are more affected by predictable seasonal changes rather than the whims of the property market. However there are hotels that market heavily to the local area as well as tourists and these hotels that are busy all-year round are the ones you really want to be investing in! On the other hand, if there is no competition you may need to ask yourself if there is really a demand for the type of hotel room investment you are thinking of getting involved in and whether you will get your returns. The track record of hotel management – Although the location and appearance of the hotel is important, the experience of the guests should be just as important to any investor. If the guests that stay at the hotel aren’t satisfied with their stay, will not return and are likely to leave bad reviews meaning future guests will be put off from staying at the hotel.
Utah Hotel Lawyer
When you need legal help with a hotel or motel in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506