Anyone who is looking for an investment in property, couldn’t do better than to invest in UK hotel rooms for sale and reap the rewards.
Increasingly we are seeing buyers invest in hotel rooms as a way to broaden their portfolio, produce high stable returns and do not need to use large quantities of energy for those returns. With UK tourism at record rates, and rising, this is the time for investors to invest in this sector that provides high, sustainable yields and capital growth. Is there a better investment at this moment?
While it appears to be a fairly recent idea, investment in hotel rooms has been around for many years, and has been used by several of the major hotel chains as a way to fund and buy new hotels. Essentially how it works is for an investor to purchase a room in a hotel on a leasehold basis, just like you would buy an apartment in a block of flats.
How does this system work?
The owner also has a rent deal with the hotel operating company (sometimes known as a sub-lease).
This is common practice for the freehold owner (sometimes referred to as the developer) to be a separate party from the operating business. The explanation for this is that there is normally a Special Purpose Vehicle (SPV) company for each hotel within the hotel community set up to ring fence the activities of that hotel from every other hotel group.
Do I get paid if the hotel room is empty?
The rental agreement states that the hotel agrees to pay a fixed rental sum to the owner of the room in return for renting the room out to accommodate hotel guests. The rent is paid year-round regardless of room occupancy. Therefore, if the room is empty, the investor will still receive income, equally, if the room is occupied year-round, the investor also still gets paid. Normally this rental agreement is for a fixed period of time, after which can be renewed on new terms, or the investor can opt-out of the investment through the way of a buy-back.
How does buy back work?
Usually the buy-back is designed as an option arrangement – for both the buyer and the developer, allowing all parties to withdraw and initiate the buy-back with a notice period (typically 1-2 years) at a pre-agreed uplift to the original purchase price. Some developers offer buy returns at year 5 or 10, with an uplift on the initial price anywhere from 1.5 – 2.5 percent per year.
Is it a better investment than residential or student buy to let?
This investment, is similar to student accommodation, it’s a cash-only investment, with no financing options available, and it is superb for cash investors looking for solid returns. This is somewhat similar to student accommodation, but hotel investment has a negotiated buy-back arrangement in place, allowing investors a smoother, easier exit rather than reselling to another investor. Also worth noting there are no recurring costs such as repairs, or hotel investment service charges.
What are the advantages of investing in a UK hotel room for sale?
A secure investment
Hotels are a sub-set of commercial real estate, generally thought to be lower in risk and safer than other investment generating income.
Extra monthly income.
Hotel rooms deliver investment that is completely hands-free.
You relax and you get the income.
Growth potential for your investment.
Choose a hotel in a prime location. Over time, the price per night rises higher, and so does the earning potential of your investment.
Hotels are run by professionals.
Hotels are run by teams of seasoned hospitality experts. They will look after your investment for you as it’s in the best interest of the hotel.
Choose a hotel with an excellent reputation.
You will put your trust in the hands of expert and skilled professionals.
Use your hotel room when you wish.
One of the advantages about owning an upmarket hotel room is that you can use it yourself with friends or family free of charge, one or two weeks per year. You can allocate this time to your friends or relatives.
How much are the hotel rooms for sale in the UK?
Investment in hotel rooms can range from £ 50,000-£ 250,000 depending on which part the country you are looking. Hotel rooms in London are usually up to £ 300,000, with yields of around 5 percent. When you look outside London, you would obtain higher returns and lower investment standards.