If you are new to hotel investing you need to know it’s a very big step up from just ordinary property investments. Hotel investing is one of the most solvent and fluctuating industries. In the first half of 2018 along investment in UK hotels have reached £3.2b. Discussed below is a step-by-step for hotel investing.
Step 1: Overview of asset classes
Before investing in any hotel you need to know and understand the different types of hotels you can invest in. You will have to then choose which type will be best suitable for you.
There are four different types of hotels.
The “full-service” is more suitable for the upper class as it caters for everything a guest could possibly want. They are covered with restaurants, bars, conference halls as well as fully equipped spas, leisure and sport facilities.
The “limited-service” hotels offers just about the same as the “full-service” hotels it’s just less luxurious. It still covers the restaurants, fitness facilities, conference halls and swimming pools. With this type of hotel you can expect to run a predictable operation.
Budget hotels as the name says offers relatively low rates. The services are however quite standard as they don’t have much available besides a laundry service and cafeteria.
The “extended stay” is more of a home away from home kind of situation. For those people who require a temporary house with the features similar to living at home.
In the UK you are now even given the option of investing in hotel rooms. It’s much more affordable and can save you time and money as well.
Step 2: Do you have enough capital to invest?
Do you have enough capital to invest in the hotel you want? Assuming you do not have enough you will have to seek the help of bank loans. Investing in housing properties are costly enough but investing in hotels are in a whole different league. Property owners calculate rental income. Similarly hotel investors need to calculate the average daily rates and revenue per available room to keep track of whether it is worth investing or not. Specific metrics are applied to track the growth. As an investor you will have to deal with other possible investors and owners so you need to ensure you are always at the top of your game.
Buying a hotel in the UK attracts a UK Stamp Duty on purchase as it will exceed £ 150,000. You need to ensure you have viewed all the necessary documents like the lease, title dead and land registry from the owner.
Step 3: Selecting a hotel
There are so many hotels looking for investors you just need to be sure you find the best. Before you invest in a specific hotel you need to be sure you will be getting something out of it. Do not forget to take into account all the possible income and expenses the hotel has as well as any other hidden clauses. You need to research each possible hotel properly as you don’t want to regret it in the future.
One of the most important aspects of a hotel is to ensure it is in the right location. Besides the right location the demand is also driven by attractions, colleges, restaurants, special events, views and pretty much anything that will make people want to visit and stay at the hotel. There’s no point investing in a hotel that doesn’t make money.
Step 4: Investing in the hotel
Once you have decided on the type of hotel, confirmed you have enough capital and you have found the right hotel to invest in you are now ready to actually invest. Everything you have planned so far leads you up to this point. This investment could make or break you. If you invested in the right hotel you have nothing to worry about and will soon own your own private jet. If not this could cause you to lose almost everything you own depending on how bad it is.
There are a large number of reasons why you should invest in hotel properties. You get increased and diverse returns. The demand for hotels is always rising and people love travelling all over the world. If you have enough funds to invest in a hotel then you should go ahead as it could be one of your best investments provided it is with the right hotel.