With the economy the way it has been for the past decade, investing money in a reliable asset has been a difficult task. More than ever, we’re having to question whether an investment is really worthwhile or whether the risk is just too high. Recently, those with some money to invest have been leaning towards a new market; hotel room investments. After this guide, you’ll know exactly why!
What Are Hotel Room Investments UK?
Why are members of the public investing in hotel rooms? Why aren’t the hotel companies looking towards banks to receive their required funding? Unfortunately, banks are limiting who they give mortgages to and this means that hotels are having trouble finding investment. Rather than closing down or going into debt, the hotel industry has opened up to the public and is allowing people to invest in rooms.
Although operated by the hotelier, you buy the room and receive a fixed percentage return for all the years you remain as an owner. Once the fixed period has come to an end, the hotel will normally buy the room back (at an increased price) and you’ll have made passive income for a number of years. This is the ultimate passive, hands-off investment because the room in which you invest is looked after by the hotel company. Once you’ve invested, all you need to do is sit back, relax, and watch the returns come in.
When a hotel company spot an establishment they wish to refurbish or improve, they need capital but aren’t currently finding support with the banks. Sometimes, they have funds but don’t want to buy the hotel outright so they buy the freehold of the property. From here, you and several other investors will provide the capital and they will manage the building. Once the specified period is over, the hotel has gone through the improvements, they’ve started hosting weddings and other events, and they’ve boosted overall income.
If you choose hotel room investments
Why Invest in a Hotel Room?
While most investment options these days struggle to promise anything over 5% for returns, hotel room investments UK are currently averaging around 10% each year. Also, regardless of how many people stay in the room over the course of your ownership, this interest rate will be fixed. With this in mind, it’s a great way to earn money (considering you also don’t need to do anything to look after the room itself!).
Depending on the company in which you invest, the buyback price will also offer a nice little profit. For example, some companies will offer a 120% buyback price. Suddenly, on top of all the interest, you’re making money during the selling process too. All things considered, there are plenty of reasons for investing in a hotel room;
- Low Entry Level
- Guaranteed Income (around 10%) For Number of Year
- Guaranteed Buy Back Options After Number Of Years
- Totally Hands-Off Investment (Passive Income)
- Some Hotels Offer Up To 2 Weeks Per Year Free Stay
Let’s not forget, you’ll also be in the position to show off to your friends; ‘oh yes, we own a hotel room.’
Potential Risks of Hotel Room Investments
All investments have risk, so what are the main dangers with this one? Well, the success of this plan comes down to your choosing of the hotel company. When buying a hotel room, you’re placing lots of trust that the hotel company will manage the building correctly, improve it wherever necessary, and increase profits.
With this in mind, you need to do your due diligence when searching for opportunities. If the hotel company has extensive experience, is making a solid profit with their other locations, and is managed by experienced leaders, this will allow you to be confident in the investment. If you don’t do your research, the investment will soon end poorly (this is the same for all investment!).
If the hotel company were to fail, you would have to communicate with the other investors, potentially convince another hotelier to take over the building, and it suddenly loses its passive nature.
Finding a Reliable Opportunity
How do you find these opportunities? They aren’t exactly something advertised on social media or on the TV, so how does it all work? While some hotels may advertise investment opportunities, we recommend finding specialized companies who look after these types of projects. For example, at Property Invest UK, we work with a handful of hotels who have trusted us to find investors. Since you can trust us and our experience in the industry, you can trust that we will only ever bring reliable investment opportunities to the table.
Regardless of how you find the opportunities, you should always do some research on the company. If it’s a new company looking to manage their first hotel, this should be considered carefully; if it’s your first time investing, we recommend looking for experienced hotel firms who have experience, have managed other hotels around the country (perhaps even in different countries), and have been able to transform hotels with hotel room investments UK.
If you find the name of one of their other locations, look on TripAdvisor and check out the reviews. If there’s lots of negativity, you don’t want this to be happening with your own hotel room so this could be a problem. If customers are praising the staff and talking positively about their experience, this is a much better sign.
Nowadays, we all have some brilliant tools available to us so take advantage of TripAdvisor, Companies House, LinkedIn, and even social media!
When the world seems to be low on reliable investment opportunities, we think the growth of hotel room investments has been a brilliant addition. More reliable than many investments and with potential returns of 10%, there are some fantastic opportunities around and we recommend continuing your research. You could be the proud owner of a hotel room while earning fantastic returns very soon!