Resort developers keen to attract UK investors

Tighter mortgage lending and falling prices are encouraging resort and hotel developers both in the UK and overseas to offer incentives to potential UK investors.

As the saying goes, every cloud has a silver lining. With the massive cloud hanging over the property market, hotel developers at home and abroad are offering potential UK investors some serious silver linings indeed.

Buy to let hotel rooms have become big business in recent times as both property and tourism figures have skyrocketed

Experienced developers have been inviting private investors to buy hotel rooms on a freehold basis within their developments. In return, investors who buy hotel rooms receive income from the hotel, enjoy capital appreciation and can even stay for free in the hotel.

Investors who buy hotel rooms but don’t require personal use will find them ideal for purchase via self invested personal pensions (SIPPs) - delivering tax-free capital growth and earnings. Either way, returns from hotel income alone have been in excess of 10% pa, easily outstripping traditional buy to let yields.

As the credit crunch has tightened however, the number of active investors in the property market has tightened too. For developers of buy to let hotels, both in the UK and abroad, that’s meant offering enticing incentives to attract new investors and encourage people to buy hotel rooms.

A new 4-star development in the popular upmarket tourist destination of Sesimbra in Portugal is a perfect example. Despite the current lending market, the developers have used their clout to arrange mortgages of up to 90% and are offering 7% cash back to early investors who close before November 15th, 2008.

For the right investor, that means a luxury studio suite will cost as little as 3%  (or a little over £5000) with an expected overall 11%+ ROI. The developer has even agreed to pay all closing costs saving nearly £20,000 on the same unit.

Buying hotel rooms no longer a niche product

This is not likely to be a one-off either as Mark Bingham from Owner Invest, the UK-based firm that’s handling the sale explained: “Buying hotel rooms has gone from being a niche activity to one of the strongest aspects of the property market with investors attracted by the relative security and hassle free nature on offer when compared to traditional buy to lets. Having said that, developers still need to attract quality investors and so we’d expect to see more deals like this coming on stream. For savvy investors that can equate to massive savings and, perhaps more importantly, the chance to invest in hotel room projects at up to 30% below current market value.”

“These aren’t cut price developers either. Some of the biggest names in hotel development and hotel management have been offering buy to let hotel rooms for years, feeding the demand for affordable investments. The only difference now is that a sellers market has become the ultimate buyers market – and there are some amazing deals to be had.” he added.

Nor is this purely an overseas opportunity. Owner Invest are currently in negotiations to develop traditional stone cottages overlooking one of the world’s oldest and most exclusive golf courses. Membership, which cannot be bought for love nor money, is included in the price.

Recent figures announced by the tourist industry suggest that holiday bookings have held their ground despite the gloomy economic conditions and internal tourism, those taking holidays in their own countries, has actually grown in many places. With buying a hotel room being as much an investment in tourism as it is in property, buy to let hotel rooms might just be the one property investment still worth considering.

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