Hotel room investment is the newest and hottest trend on the global real estate market.
In accordance with the real estate investor and developer, Adam Hochfelder, the hotel room investment is part commercial property investment, part residential property investment. Moreover, this form of investment is growing relatively fast and here's why.
Ease, Accessibility
Hotel investment is made accessible to anyone by investing in hotel rooms. The hotel industry is one of the biggest and fastest growing industries in the world. As a result, all the smart global funds and large investment companies are increasing their exposure to hotels. Moreover, there are even hotel investment funds. However, many private investors like to keep control of their own investments. So, they don't like investing in funds. However, they can’t afford to buy a hotel. Now, they can invest in a hotel room.
Low Risk
As Hochfelder further explains, hotel room investing tends to be one of the lowest risk investments available. This is because the investor has the opportunity to invest in a globally recognized brand, further, into an established hotel under an established brand.
Hands-Free Investment
Hochfelder, the managing director of Merchant Hospitality, considers investing in hotel rooms to be the perfect form of investing. He stresses out that you can invest in a room (rooms) of a hotel that is performing well from a number of hotel investment companies and sit back, relax and collect the income.
Too good to be true? Not in this case.
Your room, as a part of the hotel, is serviced and managed by the hotel managers. At the end of every month, you get a share of the hotel income (either of your room’s income, or of the overall hotel income).
There are usually incremental refurbishments depending on the term of the investment.
Again, this is simply because your room is taken care as a part of the hotel. Hochfelder points out that you can even get some free usage thrown in.
Guaranteed Rental Yield
Despite residential and commercial real estate, a guaranteed rental yield is a part of many hotel investments deals.
Many hotel investments deals come with a guaranteed rental yield. This is another factor that makes hotel room investing less risky and also makes calculating return on investment easier.
Guaranteed Buy Back
When the hotel investment deal is made, many hotels conclude the agreement with a guaranteed buyback offer. This ensures you that after a given period, the hotel owner or investment management company will buy back your hotel room for a contracted amount.
As stated by Hochfelder in the article Tips on Closing a Real Estate Deal, in most of the cases, the contracted amount is 125-150 percent of the purchase price. In the perfect deal, the buy back is optional, meaning that you can either stay on as the owner or sell on the open market.
