Investing in Hotel rooms

[ChrisSilver]

Does anyone have any experience of investing in Hotel rooms? Depends on the company, but usually for an investment you get a % of profits, or a guaranteed return per year, and sometimes free nights to stay at the hotel.

With developers promoting guaranteed returns of 10% for 5-10 years with guaranteed buy back of 110-120% of initial investment after the 5-10 year period. It looks like a good investment.

Obviously it is only guaranteed as long as the company remains solvent, and if it when into liquidation it might be a difficult to get some or all of your investment back.

Although I have seen some companies that structure the loan you give them securing it against the value of the property itself in cane anything went wrong. Here for example (although this is structures as a loan to this hotel business over a 5 year term and not an investment in an actual hotel room) http://www.investinrooms.com/our-investments/hotels/hind-hotel-wellingborough/

Has anyone done any in depth research into this or has anyone actually invested in a hotel room before?

[ApisMellifera]

Still a 'learning newbie' when it come to property investing and an avid listener of the Property Hub podcast.

I think you may find this podcast on the Property Hub interesting, although it might be slightly off-topic? The guys of TPH discuss the pro's/con's of 'serviced apartments' and will also do further in-depth shows in the near future.

http://thepropertyhub.net/tpp171-serviced-apartments-next-big-thing/

I actually spend a couple days in Berlin in a serviced apartment in June. We found it was a very good concept and was our deal breaker over some of the Air Bnb's.
 

[ArthGoch]

Had a couple of rooms in the UAE in the early 2000s.

One was structure on part equity and which besides giving a yield also guaranteed you occupancy for so many weeks in the year. The other room was a straight purchase and rental.  Both worked well, and for the part equity there was a clause which allowed the developer/managing agent come ground owner the right to buy out all of the rooms at a given price after five years and which they did. The latter I bought with a work colleague and ultimately I sold my share to him

I had lived and worked in Dubai for a number of years, and thus were aware of the potential pitfalls with some of the developers and  as the events of 2008 showed this is not for the faint hearted. Subsequently I would say you really need to know the market and do your homework if you think of this potential location or anything overseas

Something similar I have been looking into recently is purpose built student accommodation 'pods' and which work on a similar model. As higher education becomes more commercialized the customer ( student) is demanding better facilities. There are a number of developments going on across the UK, and again they similarly guarantee the income for so many years. Although these developments are independent of the Universities they serve, the symbiotic relationship appears a lot stronger than a guest/hotel and almost acts as a guarantor in respect of occupancy and I suppose legitimacy of the development

The key to the student pods I believe is knowing the locality which they will serve and understand firstly the lack/surplus of student accommodation, secondly the potential for academia to expand within the area, and finally location-location-location. 

Goes without saying none of the above is a recommendation - There are risks and benefits, it is then up to the individual to see if this fits with their overall objective

[ChrisSilver]

9 hours ago, ApisMellifera said:

I think you may find this podcast on the Property Hub interesting, although it might be slightly off-topic? The guys of TPH discuss the pro's/con's of 'serviced apartments' and will also do further in-depth shows in the near future.

Thanks. I will give it a listen now.

[MickB]

I did look into buying a hotel room in Bulgaria over six years ago but decided against it and bought a cottage in Croatia instead.

It's one way for the developers to get the money up front so they can proceed with the build. I was concerned that if I signed up and it took another two or three years to get all the other rooms paid for by investors before they could proceed with the build, then building costs could go up as well. They wanted a deposit first but if it never went ahead then there was the risk of losing my deposit. I never took much more interest in it after I bought my cottage but it would be interesting to see how it went.

The returns they quoted looked good though.