Safe as Hotel Rooms

Why UK investors who buy hotel rooms consider them a safe bet

The recent economic woes and collapse of the housing market is leading some UK investors to consider non-traditional property investments – specifically buy to let hotel rooms - as safer bets compared to traditional buy to let and renovation projects.

Under normal circumstances the phrase ‘non-traditional investment’ would not be associated with playing it safe, but the investment market at present is far from ‘normal’. The uncertainty in the financial markets and the collapse of both property prices and mortgage lending, have hit property investors hard. For those still in search of investment opportunities, safety and diversification are key motivators.

The idea that you can buy hotel rooms might seem like a strange concept but its growing appeal is down to these very same motivators. Experienced hotel developers allow private investors to buy hotel rooms within a, normally high-end, hotel development. Investors that buy hotel rooms benefit from both capital appreciation and a regular income from hotel rooms let.

Buy to let properties have always offered savvy investors a keen return, but as mortgage rates climb faster than rents can go up, many have been left out of pocket. Moreover any time the property stands empty means hefty monthly mortgage repayments and no income.

Buy to let hotel rooms offset these risks by basing the investors’ income on the performance of the hotel as a whole, not their individual suite, and so provide a regular income level. Even at 50% capacity this can often be enough to provide a healthy return for investors who buy hotel rooms.

Hotel rooms diversify your property portfolio

Of course, having all your investments eggs in one property basket is still a risky bet, which is why buying hotel rooms is viewed as a way to diversify a property portfolio. Purchasing a buy to let hotel room is more of an investment in the tourism industry in the region rather than a straight property play. It’s a fact that particularly appeals to those planning for retirement as, provided you don’t need the free stays on offer, you can even buy hotel rooms via your self-invested personal pension (SIPP) scheme.

As Mark Bingham, from property company Owner Invest, who specialise in helping investors buy hotel rooms, explains: “There is certainly still interest in the property market as many smart investors see this as an opportunity to find bargains. Of course, all our clients are concerned with the security of their investments, which is why the idea of being able to buy hotel rooms tends to appeal. They have the right mixture of security and opportunity. More to the point, the slowing market is encouraging developers to make some fantastic offers at present, often selling at up to 40% below market value. ”

Case in point: Owner Invest’s latest luxury hotel rooms in the upmarket tourist town of Sesimbra, thirty minutes south of Lisbon in Portugal.

The 4* Sesimbra Bay Beach and Spa Resort is offering freehold luxury suites on a buy to let basis from as little as £169,000 and have arranged up to 90% mortgages for investors. Keen to attract secure UK investments the developer is also offering to cover all closing costs (around £25k on a one bedroom) and pay 7% cash back to early investors who complete before November 15th, 2008.

As Mark Bingham added, “This is a four star frontline luxury resort in one of Portugal’s favourite tourist destinations. The developer and hotel management team have first class reputations and a string of successes behind them. The only reason we’ve been able to negotiate such a great deal has been down to the economic climate, but for the right investor a little over £5000 will buy a fully furnished luxury apartment with potentially high yields. Even at two-thirds capacity that would deliver an average £10,000 a year per investor.”

Of course, for those not buying via a SIPP, investors also get the perk of free stays in the hotel as well - a little bit of luxury to part the dreary economic clouds.

More here about the luxury hotel rooms in Sesimbra Bay

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