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The New Buy-to-Let - High Yield Hotel Rooms, Apart-Hotel Rooms and Condo-Hotel schemes
Please click here to view a list of current Apart-Hotel, Hotel Room and Condo-Hotel investment property for sale - from just £50,000
Hotel room property investments - the fully managed, hands off, high-yield, lower-risk asset class that should be a part of every investors portfolio - whether a pure hotel room or an apartment-suite in a hotel. Hotel rooms are widely regarded as a superb turnkey investment product that are fully managed for the investor and require very little involvement.
Some Great Reasons to Invest in Hotel Rooms :
 Hands-off property investment - fully managed by the hotel operator- Relatively low risk investment, due to the booming hotel sector
- High yields of between 6% to 10% plus achievable
- Some hotels are well known brands and command higher prices/ lower yields, others are less well known brands but offered on higher yields
- Some schemes come with rental guarantees during the hotel start-up period
- Some hotels have been operating for years or even decades and are now available to purchase on a room by room basis
- Intensive rentals typically produce much higher income per month than traditional longer lets on buy to let
- Finance is available of up to 70% loan to value or better (but more limited in SIPPs / pension purchases)
- Many schemes can be purchased by SIPP/ pension investors as a qualifying property investment
- Some schemes come with developer finance or easy stage payments
- City-Centre, Regional Towns, Holiday Resorts - UK or Overseas, you choose !
Buy to let hotel rooms are superb income generators that are normally cash positive from year one even if fully mortgaged. As well as being tax efficient, hands-off investments they also offer lifestyle advantages as many are located in luxurious holiday locations where investors can take advantage of free personal usage that is often included in the investment (strictly forbidden if you purchase via a pension).
Individual hotel room property investments were introduced commercially several years ago by GuestInvest, the London hotel developer and operator founded by Johnny Sandelson. Johnny was previously a successful buy to let investor who saw hotel room investments as the next big thing several years ahead of most others. Now the GuestInvest model is working well in London and will shortly roll out across other European cities but several other hotel room investments are now coming to the market, generally at lower prices to the £350k+ GuestInvest level.
Any hotels that Assetz for Investors sources or develops are fully operated and managed by established, branded hotel management companies. There are generally no ongoing maintenance, refurbishment or furniture renewal costs and these are absorbed by the hotel management company under the terms of the lease.
Revenues from buy to let hotel rooms are typically allocated around 40% to 50% to the investor (varies per scheme) with the balance going to the management company/ operator.All food and beverage income is typically retained by the operator. Due to the room income being shared so equitably, the hotel operator is well motivated to maximise room revenues, rental returns and occupancy rates and hence benefit the investor. This is completely unlike the traditional buy to let letting and management agency on a mere 10%-15% charge against rental income for management services.
Hotel room investments can offer very high NET yields in the region of 6% - 10% plus in comparison to normal buy-to-let apartments that may offer only 3.5% net rental income after costs (voids, management and letting fees, service charges etc). All rooms in hotel schemes are normally supplied fully furnished.
Investors typically receive quarterly accounts with full publication of revenues generated by their room.
Rooms usually offered on a long-term leasehold basis. In some cases the room income is pooled for the whole hotel or for a class of room. In other cases the rooms are let on an automatic rotation basis to ensure fair income apportionment.
 Hotel rooms are a robust deferred income investment if purchased with a mortgage to reduce the cash investment required and the high income levels are used to repay the debt. This gives a greater yield on original investment in years to come versus paying cash for the hotel room and receiving immediate income.
Hotel Room Income Investment Analysis:
We have shown a typical example of a high-end hotel room investment below. Hotel room investments start from £50,000 and the yields shown are typical. The first 4 years have accelerated Average Room Rate Achieved and also show Occupancy % rising strongly as the hotel reaches critical mass in marketing terms. City centre hotels typically take around one year to reach optimal room rental levels and occupancy whilst holiday resort hotels can take around three years. A three year optimisation curve is shown below, showing accelerated room income growth as the hotel achieves optimised rental income, followed by standard room cost inflation.
Some newspaper articles on this booming sector :
Hotel Rooms As A Pension Investment :
Hotel rooms are classed as commercial assets and are one of the very few property types allowed to be purchased directly by a pension / SIPP. Investors can purchase a room through a Self Invested Personal Pension (SIPP) either individually or in a group and take advantage of the tax relief available upon the income and capital growth. A  pension purchase could receive up to 66% income tax 'top-up' (for a 40% tax payer) from the government.
For a comparison of hotel rooms to traditional annuity investments for the purposes of income generation please read our 'Hotel Rooms As Pension Investments' article.
Example Purchase For a SIPP/ Pension Investor:
To purchase a hotel room property, either an existing or a new SIPP/ pension may be set up (from £250 as an Assetz SIPP). The pension may already hold cash or the investor may make a pension contribution and receive a tax top-up from HMRC.
- Typical example of an apartment at £60,000
- Pension can borrow 50% of net assets of the pension so maximum loan is £20,000 and the pension needs to contain £40,000 cash
- An upper rate 40% tax payer would need to contribute as little as £24,096 after tax rebates to achieve a cash lump sum of £40,000 in the pension.
- Purchase the apartment using the £40,000 cash and £20,000 loan
- Assuming a 10% yield pa (£6,000) this would repay the loan in just over 3 years and after that the pension would receive the full income for further investment or for draw down in retirement
- In summary, a net pension contribution of around £24k could produce an income of £6k per year into the pension (25% of the original investment per year)
- Utilising a SIPP syndicate would permit a much greater level of borrowing/loan to value and would permit a smaller investment versus the income generated, at the expense of the income being generated in a greater number of years time.
Please seek the advice of an IFA for illustrations to suit your circumstances.
Hotel Rooms - Exit Route :
Once a hotel is operating and a proven income stream can be shown then the investor can take advantage of the resale market for such rooms. Assetz offers a resale service for investors wishing to resell their investments. The room would be valued on a commercial basis according to level of rental income, quality of operator and the hotel brand. It is reasonable to assume that if rents rise 10% then the room value will rise by a similar amount as it is typically the yield % of purchase that the investor is seeking. Buying a hotel room off-plan and taking advantage of the early year's greater than average increasing rental income has been shown to be profitable on previous hotels when investors seek an exit after the first few years of the hotel being established.
Please click here to view a list of current Apart-Hotel, Hotel Room and Condo-Hotel investment property for sale - from just £50,000
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