How to buy hotel rooms

It might sound like an odd concept but for investors keen to benefit from both lucrative returns and a stunning holiday home; buying hotel rooms is becoming an increasingly attractive option. Which of course begs the question:

How exactly do you buy hotel rooms in the first place?

Let’s start at the beginning. Experienced hotel developers, both domestically and abroad, have traditionally used bank and private investor finance to fund the development of major high-end developments. Many of these developers now allow private investors to buy hotel rooms within these upmarket developments in much the same way you might buy any other property.

As an investor you benefit from the capital appreciation in the same way as if you were buying a traditional property but with two added benefits.

Hotel rooms are essentially buy to let investments

Firstly, buying a hotel room is essentially a buy to let investment – but without the need for you to find tenants or to manage ongoing requirements. As the hotel attracts guests you earn a percentage of the room rate – covering your mortgage costs and potentially delivering a healthy profit on top.

The suites in the hotel are pooled so that you’re not reliant on your individual hotel room being rented but rather share in the overall success of the hotel. Being able to offset your individual exposure in this way is, for many, what makes buy to let hotel rooms such an attractive investment when compared to the risks inherent in buying an individual property to let.

The advantages of buying hotel rooms

Secondly, as an investor you’ll also have the personal use of your suite for a fixed number of days throughout the year. In short, that means you’ll have a high-end holiday home to enjoy for up to 8 weeks a year and you won’t have to worry about who is looking after it while you’re not there. For those investors that don’t require personal, buy to let hotel rooms are even ideal for purchase via SIPPs or other personal pension investments - giving them tax free capital growth and earnings.

Having said that, the most obvious attraction to investors considering who want to buy hotel rooms is that the developer and management company who run and staff the hotel are responsible for ensuring that the hotel rooms are full and the properties are maintained to the highest standard.

That entails everything from delivering a high-end finish to marketing the resort and managing the property to providing a first class customer experience. The in-built management of the hotel makes buying a hotel room an ideal opportunity for the more ‘hands off’ investor more interested in capital growth and high yields than fixing broken toilets or placing ‘to let’ ads in the local paper.

Of course in both property and travel, location is everything. So, the first step in buying a hotel room is to find a development that will attract visitors. Choosing an established holiday destination is often the safest bet and unsurprisingly perennial favourites like Portugal, Spain and Dubai provide the right mix of high tourist volumes and high-end developments that suit buy to let hotel rooms.

Considerations for your hotel room investments

When considering the development itself, it’s worth viewing it as both investment and holiday destination. Is it a place that you would enjoy yourself? Does it offer the features that will attract guests? What standard will the accommodation be?

Similarly, the quality and track record of both developer and management team that will run the hotel must be first class. One of the biggest attractions to investors is in knowing that an experienced team is running the show. Experienced operators will have access to thousands of travel agents and potential clients worldwide and a wealth of experience in managing high-end hotels.

Once you’re satisfied with the development, location and management the final step is the deal itself. Although buy to let hotel rooms can offer a potentially safer investment than going it alone, if you are going to buy hotel rooms you need to do so at the right price. Buying hotel rooms can actually amount to a relatively low cost upfront investment. In most cases when considering a buy to let hotel room the developer’s agents will have already negotiated bank finance and the developers may often agree to pay fees and costs.

"One client in this project was absolutely delighted to discover that the price they paid was 46% below the bank valuation"

Owner Invest hotel rooms

As a perfect example, two recent developments offered by property investment company Owner Invest came with just such perks. As Mark Bingham, Managing Director of Owner Invest commented: “This is what really sets our buy to let hotel room investments apart from the rest – great products with great finance options. Royal Suites Marbella in Spain was pretty much sold out in less than 3 months because we were able to offer up to 100% mortgages and a location with high annual occupancy. One client in this project was absolutely delighted to discover that the price they paid was 46% below the bank valuation.

The high-end Portuguese development in Sesimbra is another case in point; 90% mortgages + 7% cash back and all closing costs paid if you’re deposit is received before November 15th.  Where else can you currently find a front line hotel room investment of this quality with these kind of investor friendly finance options?”

Once you’ve done your homework and found a development and investment that suits you, the process of buying a hotel room is not vastly different than investing in any other buy to let property.

Overall it’s not so much the ‘how to buy hotel rooms’ but rather that ‘why buy hotel rooms’ that counts. The benefits in terms of reduced exposure and the support of an experienced management company are what make buy to let hotel rooms such an attractive option for many investors.

Not to mention the idea of a few weeks spent sipping cocktails on your balcony – surely the ultimate investment perk!

More here about the luxury hotel rooms in Sesimbra Bay

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