Property investment has long been an attractive and lucrative business venture for many, but for those who prefer short-term investments, what are the alternative options? Hotel room investments provide great opportunities for first time investors or for those looking to diversify their property portfolios.
As a hotel room investor you are able to enjoy a regular rental income similar to buy-to-let investors with the opportunity for substantial capital growth. It’s no surprise that with political uncertainty looming and the fear of the property market collapse that this hands-free investment continues to rise in popularity.
The process of hotel room investment is much more straightforward and less demanding than other more traditional property investment routes. Hotel room investment is similar to buy-to-let investment in that it is rented to tenants on a short-term basis. However, unlike BTL, a management team employed by the hotel will collect fees for the rental of your hotel room. You don’t have to worry about advertising or maintenance costs either as that is the responsibility of the hotel, this subsequently reduces the costs you will have to pay out as an investor and therefore results in higher yields for you to enjoy.
As a hotel room investor there are two types of financial returns that you can secure – the first being a secure monthly rental income that offers potential returns of up to 8% and the second being the capital growth of your investment upon the sale and repurchase of the room which can offer returns of 15% based on a 5 year investment.
The low cost of entry and the huge price difference between hotel rooms and the average house price make it an appealing alternative for those looking to invest with a smaller budget. Although hotel room investments are cash purchases and therefore cannot be subsidised with the help of a mortgage, it is acceptable to fund your hotel room investment with loans or any other type of financial aid.
Another reason why hotel room investments are a superior choice compared to buy-to-let is due to the fewer risks involved when selling. A hotel room investment, unlike BTL, is not permanent and this is why it is a more popular investment choice for many. Due to the fact that the investment is not permanent, the contract between yourself and the hotel owner will state that you must sell the room back after a stated period of time. This minimises the risks that are typically seen in the traditional property investment market as you don’t have to worry about finding a suitable buyer or securing capital growth.
Hotel room investments are considered to be commercial investments and as such, you become exempt from paying the punishing stamp duty tax and capital gains tax that still impacts investors in the buy-to-let market. Due to hotel room investments being commercial investments, any returns can be put into an independent pension scheme where all growth and income will be made tax free.
Although hotel room investments are becoming increasingly popular among first time investors, there are certain risks that should be considered before committing to any investment. You should consider factors such as location, supply and demand and the reputation of a hotel – all of which will have an impact on the success of your short-term investment.
Overall however, hotel room investment is a highly lucrative and rewarding business opportunity, especially for first time investors or for those with a smaller budget. The comprehensive exit strategy, fast results and attractive returns make hotel room investments a tempting alternative that continues to revolutionise the property investment market.