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Invest in Hotel Room vs Buy To Let

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Invest in Hotel Room vs Buy To Let

edited 30 November -1 at 1:00AM in House Buying, Renting & Selling
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didnofdidnof Forumite
53 posts
edited 30 November -1 at 1:00AM in House Buying, Renting & Selling
Hi all, I have a small sum of money which I would like to invest, enough to buy a small house or 1-2 bed flat in a cheapish area - I have been looking at various options and typically the yield I would be able to generate would be about 7-8%.

I have come across another option which is buying a hotel room which is about the same price but typically has a higher yield of around 10%. I think this scheme is relatively new but from what I have read seems to be genuine and on the increase.

My gut feeling is to stick with buying a house 'as this is what I know', but at the same time I don't want to be blinkered and miss out on a better return. Has anyone out there purchased a hotel room and had good/bad experiences?

Obviously everything depends on which house was bought and which hotel room, but if we were to assume that a good choice in each case were to be made what would people choose and why?

in my mind the advantage of a property is that typically you get 2-3 years out of tenants with maybe a couple of months empty here and there. I like the idea of increased yield but also concerned about other factors which may bring down the occupancy rate of a hotel.

Thanks!
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Replies

  • BitterAndTwistedBitterAndTwisted Forumite
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    If selling hotel rooms was so profitable why would you need someone else to take on the liability?

    What other investments do you have and has being a landlord always been part of your long-term investment plans?
  • jbainbridgejbainbridge Forumite
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    What if you change your mind ... is there a ready market for 'hotel rooms'? If there is one its pretty well hidden.

    At least with a BTL you know you'll get your capital back (depending on the market).
  • i'm not sure I understand your first question, but my understanding of the process is that a hotel accepts to sell off its rooms for an immediate cash injection in the knowledge that the person buying it will receive a portion of the yearly revenues.

    I rent out a 1 bed flat and also a 3 bed property and both have been trouble free so far and I manage them both 100%. Yes property has always been my long term plan, I may be sceptical but I don't trust external companies with pensions and I suspect the government will squeeze the state pension further so sorting myself out for the future was always my aim.
  • jamesmljamesml Forumite
    265 posts
    If the return is better, there has to be a downside. Increased risk? Can you stomach additional risk?
  • dimbo61dimbo61 Forumite
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    Who is offering 10% yield on a Hotel Room ?
    If the lips are moving think Lies lies lies !
    Lots of Hotels struggling in the current climate, you will have to pay Cash to the con merchants as No Bank will lend to you for a bedroom in a hotel.
    Same sxxt with all the adverts about buying one room in student accommodation ! No one will lend ! How can you repossess a room in a block of flats
  • there is no real study over here for reselling hotel rooms as it is a relatively recent thing, but similar ventures in the US show that the value of hotel rooms rises more or less in line with normal property.
  • hi dimbo61, the same company is offering 'student pods' as they are called but I am quite sceptical about these, all it needs is an increase in tuition fees, the university to shut or whatever and then the investment is lost. the hotel room option sounds safer, however i'm not totally familiar with it so any experiences shared from anyone would be much appreciated!
  • eddddyeddddy Forumite
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    Hi didnof

    Here's my 2 cents:

    Don't think of 'Hotel Rooms' as a property investment, think of them as investing in a hotel business.

    These investment schemes range from good ones, to schemes which are designed purely to rip-off investors. Savvy investors will pick the good ones, naive investors will often pick the bad ones.

    The salesperson will have told you all the potential upsides, you need to go through the contract with a fine-tooth comb and identify all the potential downsides.

    Examples of potential 'bad' things that you should consider in your risk assessment:

    - The company goes bust, so you lose your money (check their track record and financial situation to evaluate this risk)

    - They have overestimated occupancy and/or room rates (check performance of existing hotels, details of planned hotels in the area etc to evaluate this risk)

    - They favour other investors and use their rooms ahead of yours (is there anything in the contract to prevent this?)

    - Are they actually motivated to rent your room? (i.e. if they don't rent your room, do they suffer any financial 'pain' or do you suffer all the 'pain'.)
  • Pet50Pet50 Forumite
    54 posts
    I was considering buying a student room through Emerging Property, but felt that the 10% return was maybe a bit ambitious! Anyone had any experience good or bad about this scheme/company?
  • edited 9 August 2015 at 1:01PM
    kinger101kinger101 Forumite
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    edited 9 August 2015 at 1:01PM
    Stay away from the hotel room. These types of things are invariably dodgy, and are targeted at people who know little about investments for a reason. With the house, you can refit it as necessary when it's tired, or just sell it. You'll have no control over the hotel room, and you'll find it very difficult to liquidate the asset at anything other than a significant discount.

    But do you really want to be a landlord? What's wrong the stocks and shares?
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