7 reasons why you should consider hotel room investments

7 reasons why you should consider hotel room investments

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You may have heard of hotel room investments but who sells these? What is the minimum investment needed? What exactly do you get for your money and what yields are available? Whichever questions immediately spring to mind one thing is certain, the benefits hotel room investments offer can make them a very attractive option for savvy investors.

So why consider them?

Low cash entry levels

Many people automatically assume it will take a significant level of capital to buy a share of a hotel development. In reality this is not the case with as little as £15,000 needed to buy a fraction of a hotel room as a long-term investment. These low cash entry levels are very attractive to investors, allowing them to build a diverse portfolio across a number of different investments that spreads any risk involved, (rather than putting all their eggs in one basket with just one large property investment). It also means there is no need to attain a mortgage (as will often be the case with a traditional buy to let property).

Fixed returns

You can typically expect hotel room investments to achieve fixed annual returns of 7% – 15% for a guaranteed period of up to 15 years. Whatever returns are being offered with a particular development, these usually remain the same whether you purchase just a fraction of a room or an entire suite. This means that hotel investments can give attractive rates of return for every level of investor (hence their increase in popularity).

Holiday usage

One of the more exciting benefits of hotel room investments is the inclusive holiday usage investors receive. Although this can vary from project to project, many of the 4* and 5* developments do offer this, which gives investors a fantastic holiday home every year in addition to the returns we’ve already talked about. The opportunity to enjoy some quality time away from the hustle and bustle of everyday life as an inclusive part of an investment is certainly a welcome bonus.

Building a varied portfolio

While there is no set amount required to build up a property portfolio, historically anything in the region of £50,000 plus has been deemed a good starting point. Investing in hotel rooms gives you the ability to split this pool into smaller lots allowing you to introduce an array of different investments in different parts of the country or even dotted across the world. This will ensure that your portfolio is not overexposed to one particular development, one particular country’s economy or one particular style of hotel.

Hands off investment

The ability to invest in a hotel development with a guaranteed rental return without the hassle of day-to-day management should not be underestimated. Leaving such day-to-day tasks in the hands of the experts ensures maximum efficiency, maximum return and increases the potential for long-term capital growth. If you want to simply place your funds in a rewarding investment whilst avoiding tenancy and maintenance hassles, hotel development investments could be ideal for you. This is one of the key reasons why they attract the attention of experienced and relatively new investors alike.

Living the five-star lifestyle

The ultimate aim of investing in property is to increase your cash flow through a passive income, allowing you to take a step back from the daily grind and really enjoy life. Hotel investments are a great way to provide a luxury life style today, whilst also building capital for your future. You can pick and choose the location of your hotel room investments based on your long term investment criteria, thereby enjoying perks such as inclusive holiday usage on a regular basis in a variety of locations. Choose your developments carefully and you could significantly increase your annual holiday time.

How do hotel developments stack up against the traditional buy to let?

We’ve all been there, long winded detailed research into a dream buy to let property only to be gazumped at the last moment. Endless expenditure on redevelopment of that elusive buy to let asset only to see costs spiralling out of control and your investment payback period constantly extended. Hotel room investments certainly offer a simpler alternative and with a growing market there are plenty of opportunities to choose from. When you also take into account the lack of hands-on management it is no surprise that more people are considering this particular path.

Further reading:

Which property investment strategy is right for you?

Essential guide to hands off property investment

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