buy-to-let hotel rooms?

tucbiscuit

My dad was telling me about buy-to-let hotel rooms yesterday; basically the exact same as a buy-to-ler house or flat, but a hotel room where you invest and share the profit 50/50 with the hotel.

Now in the current climate the returns and stability look rather appealing and also the hassle free nature of it.

Look from what I have seen so far the deal is you get an even share of profits from all rooms in the hotel, so even if your specific room never rent out, but the other all do, you still get an even share of all profits (yields look pretty good as well, often with guarenteed percentages).

Another nice little perk looks like the facility for you or family/friends to stay in the room free for 52 nights of the year.

Anyone ever done this? any of the mortgage brokers ever done a mortgage on one?



here's a couple of links;

http://www.guestinvest.com/

http://www.ownerhotel.com/

lynzpower

I have had discussions about this before.

I just cannot see how a hotel room can bring in the same return as a BTL. A BTL ( all being well of course ) has someone living in there and contracted to pay for 6ms or 12ms depending on the tenancy. if they leave within that tenancy they are still legally contracted to pay for that term.

A hotel room is just that. you might book a hotel room in london for one night, two nights. then you need to find someone else to book in for the rest of the time. whether you or the management co do this is anyones guess.

My understanding is that the sort of people who are buying these rooms are larg companies, ( banks, insurance cos etc) who usually have to play out for hotel bookings anyway, so at least with this their visiting clients always have somewhere to stay.

Another nice little perk looks like the facility for you or family/friends to stay in the room free for 52 nights of the year.

But if you do this, say the room rents for 200 per night, then you ar epaying/ losing 10400pa. Doesnt seem quite a perk now does it!

IM confused by the resale market. Im not convinced that the market is wide enough for that resale. For 275k ( yes, thats 275k ) which s what they are selling for - then on a 100% mortgage you are looking at spending welll over 1790pcm repayment. Now Ive had a gander at google to try and fathom how mcuh it is to book a room there, and it baffling, none of the major booking sites seem to be throwing much up?? SO where are they advertising for bookings??

Personally I would say this is SUPER high risk, unclear of returns, difficult to work out where they are advertised *could it be sat empty?* baffling to work out what sort of mortgage this would require, and difficult to be convinced on who it could be sold onto. money tied in an asset thats unsellable? At least with a BTL, you can get a DSS claimant in no bother, have a council manage it for you, and have HB pay your mortgage contribution.

eg http://www.rightmove.co.uk/viewdetails-15955621.rsp?pa_n=2&tr_t=buy&from_showcase=true&pa_n=2 however whether youd get the yield on this to get a BTL mortgage is anyones guess, im not too up on new exotic btl mortgages, but it used to be that 125% of the mortgage is covered by the rental income.

pamaris

This sounds like a rebranding of the much slated timeshare. I would personally never purchase such an investment.

$$$_12

tucbiscuit wrote: »

Now in the current climate the returns and stability look rather appealing and also the hassle free nature of it.

Are you sure about this? If the housing market goes down the pan - it will impact on the wider economy (and people's holiday spending/businesses travel expenditure).

epz_2

my understanding is the resale values wll be affected if house prices fall.

also if the hotel owns 100 rooms outright and 100 timeshared but it only gets 80 customers one day guess what rooms they will be put in and what rooms will sit empty.

nobblyned

The adverts I saw say they guarantee 6% return.

Apologies if I'm wrong, but can't I get more than that in the bank? And without risking the capital?

For anyone considering this I'd read the contract extremely carefully. Things that spring to mind, are how are refurbishment costs covered? Maintenance, cleaning, other overheads - fixed rates for the future or subject to review? Can these be unilaterally increased?

And of course the liquidity of the resale market would be my major concern.

Pez2

You have to ask yourself why a hotel owner would want to sell 999 year leasholds on hotel rooms. Either they need the capital, in which case you'd have to ask what they need it for and why they can't raise it by conventional means, or they think they'll make more money selling these leasholds than they would simply by retaining the rooms themselves, which wouldn't exactly fill me with confidence about the viabiliy of the hotel as a business.

Unless you understand the hotel business and what the potential risk and returns might be then I can't see how this would be any more than a gamle.

Ewarwoowar2

One thing that would worry me is: how does the hotel allocate rooms? If the hotel owns 80% of the rooms and the others are BTL, won't the hotel fill their rooms first?

If the hotel is generally 20% empty, selling off those 20% of rooms to investors is a great way of raising money for the hotel.

dolce_vita

An absolute joke and a sure sign that we have reached the top.

As gav says, the hotel owners are not prepared to invest their own money, institutional investors won't touch it so they're looking for some mugs to finance their investment.

I would steer well clear.

guppy

If you're convinced hotels are the way to make money, why not just buy shares in one?

If you're not convinced, or don't really know...well that's obvious!

Completely agree with gav and dolce...this seems just a new way to repackage the kind of "investment opportunities" that institutional investors wouldn't touch...

The only way its comparable to a BTL is in the potential to lose money. With none of the possible upsides (like actually having control of the property).

Pez2

Incidenally, if you're looking for the new way to get rich from property, I'm offering a 999 year leasehold on my garden shed. I've even got a special tie-in with my local loan shark who'll give you a mortgage on it for only 100% apr. This may be the last chance to get on the property lader so get in quick...