What You Need to Know about Hotel Investing

Each year, many tourists go to the UK in order to see iconic places and attractions. It is no wonder that there is a boom that is observed in the hotel industries through the years. The UK hospitality sector is expected to exceed around £100 billion in revenue at the end of 2018 and there’s a 6% growth shown in the past five years. You can read more about the UK in this link here. In the future, more and more tourists are expected to stay so it is safe to say that the hotel industry will continue to thrive.

One of the main reasons why many investors go for hotel room investment is its low entry points. Investors can have a hotel room that starts at around £30,000 to £80,000. Hotel investing can be a more profitable and affordable opportunity compared to a buy-to-let property. A mortgage is not typically needed as a way to pay the investment. This is good news for people who have a bad credit standing and who are struggling to get a mortgage.

What Can You Get on a Hotel Investment?

In some occasions, an investor purchases a hotel room on a leasehold basis. The room is then sub-leased to the operator of the hotel. The operator will agree to pay a fixed amount of rent to the investor regardless of room occupancy. The operator is now free to use the rooms for meetings or vacations as part of the agreement. Even if the room is not occupied, the investor can still get revenues and this goes on for a fixed period of time.

Other investors are torn between buying a residential property and a hotel room. A residential property is a great idea if you want to see a capital growth in about a year or so. Meanwhile, if you want to have a guaranteed yield from rental investments, the better option will be investing in a hotel room. Although for people who have deep pockets, both the residential investment property and the hotel room investment can be a nice addition to their portfolios. You can check with a property consultant company such as Thirlmere Deacon Hotel Investments to see which one is the better option for you.

Is it Tedious to Invest in Hotel Rooms?

Many people hesitate to invest in hotel rooms because they think that the investment will take too much of their time. However, this is not true for many. Many hotels offer a “hands-off” experience that will not take too much effort in the part of the investor. As an investor, you can be sipping ice-cold lemonade in the beaches of Barbados while earning income from your hotel room.

The most important thing to remember is to invest in hotel properties that have good managers. It is much better if the property is already operational. However, a startup hotel investment is still a good venture because it requires lower entry investments compared to established ones. As long as there is a great team of experienced managers and operators, then you should be in good hands.

Are there Guaranteed Yields?

A good hotel operator with lots of experience can guarantee you an annual or a monthly yield. It all depends on the strategy of the management. An example is when the hotel operator buys hotels for about £1 million. He then splits the rooms and he might sell for £70,000 each.  The hotel operator can generate a total amount of £2 million with a profit of £1 million. He will be able to buy a new hotel using the profit and continue with this strategy for a long time. The yields that come from the profits are them paid to the investors.

What if the Unexpected Happens?

There might be times when hotels fold. This is why it is important to choose an investment vehicle with care. More often, investors choose a vehicle that includes off-plan properties that are never realized or never came to fruition. You can read more about off-plan properties in this link: https://en.wikipedia.org/wiki/Off-plan_property.  The money will never return and will just disappear like bubbles.

This is why a hotel that is already in operation for at least 3 years is a great option. They have repeat guests and customers. They already have a track record for inviting and attracting clients and tourists. These hotels are not dependent on the money that they make from their rooms. They can generate other sources of income that can include restaurants and resorts.

Conclusion

A UK hotel room is a good investment if there are great managers that operate it. An annual or even a monthly stream of income is possible if you do your research well. If you don’t know where to start, the good news is that there are a lot of professional investors that can guide you in the right way. You just have to search for them. Start getting a return on investments today by going into the right website.