Monday, 12 March 2018

To Buy Hotel Rooms Or Not to Buy Hotel Rooms?

In recent years, experienced hotel and resort developers have been offering private investors the chance to invest in hotel rooms on a buy to let basis. Of course, the idea that you can buy hotel rooms sounds glamorous but how do buy to let hotel developments compare with traditional overseas property investments? If you’re thinking about investing in property overseas then there are probably a few things on your wish list. A manageable investment level, a hands off project, an excellent return on investment and possibly a magical destination that you’ll want to visit year after year will all be important.
Of course, with the current economic climate, you’ll also want a secure and safe investment that is likely to ride out the property downturn.

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It’s not that surprising then that one of the more recent features of the overseas property market – buy to let hotel rooms – is continuing to grow despite the doom and gloom elsewhere. All but unheard just a decade ago, the opportunity to buy hotel rooms is often seen as a perfect way for private investors to limit their personal exposure while still enjoying both the income benefits and potential capital growth of buy to let property investment.

So what, exactly, do you have to do to buy hotel rooms?

Buying a hotel suite is not that different to traditional buy to let property investments. A hotel developer will sell a number of rooms, suites and apartments within the hotel to private investors. As business travelers and tourists book the rooms, the developer pays out a percentage of the room rates back to the investors.

Investors who buy hotel suites get a ‘hands off’ investment where an experienced hotel management team handle everything from marketing to maintenance. Financially, buy to let hotel developments can deliver both capital appreciation and regular income with returns in the region of 10%+ from income alone being regularly achieved. Of course, when you buy hotel rooms there’s always an added bonus to consider – free and discounted stays in a high-end hotel.

So how do they compare with other overseas property investments? Buy to let hotel developments can help minimise risk.

The way in which hotel developments offset individual risk is one of the biggest attractions for investors keen to buy hotel rooms. Buying an overseas property to let out brings with it one big risk – not being able to let the apartment or villa you buy. When you buy hotel rooms, the returns are not based on the particular suite you purchase but rather the success of the entire hotel. An occupancy rate of just 50 – 60% would normally be enough to deliver a solid return on a buy to let hotel room.

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