UK Hotel Room Investments
UK hotel room investments have become an increasingly popular property investment in recent years due to their affordable entry levels, attractive returns and their fully-managed, hands-off nature.
With inbound UK tourism having grown consistently from 29.8 million visits in 2010 to 39.21 million visits in 2017 (source VisitBritain.org) and with growing trend in the number of UK residents opting to take domestic short breaks and ‘staycations’, quality hotel room investments in the UK can offer higher annual yields than most comparable buy-to-let investments.
Why invest in a UK hotel room?
- High rental yields of up to 10% NET per annum with some investments offering assured returns over a 10 year period.
- Affordable entry levels with investments from £65,000 which do not incur stamp duty tax.
- Developer buy back options from year 5 and up to 125% in year 10.
- Fully managed, passive income asset with experienced hoteliers responsible for day-to-day operations.
- Personal usage options available with some investments offering owners 2 weeks free accommodation each year.
- Leases of up to 125 years with title deeds recorded with the land registry.
How do hotel room investments differ from traditional buy-to-let properties?
Pricing & Finance: Hotel rooms tend to have a lower purchase price than residential property given the size and purpose of the units. They are also generally not properties a bank would be prepared to offer a mortgage for and so the required cash input needs to be available to the investor. Some developers offer a deferred finance model where a portion of the asking price is offset against future rental returns which lowers the cash input required by the investor.
Ongoing Costs & Management: Unlike traditional residential buy-to-let properties, the hotel investment business model ensures the investor has no ongoing fees or maintenance considerations. The investor does not need to concern themselves with finding tenants, void periods, or the general upkeep and maintenance of the property as these are the concern of the hotel operator. Hotel rooms offer fully-managed, hands-off property investments.
Rental Yields & Returns: With short stay room rates maximising the potential revenue possible from the property, investors can expect significantly higher yields (paid annually in arrears) from a hotel room than they could expect from a residential buy-to-let. These returns are also often assured given that the hotel will be profitable at a relatively low occupancy level.
Developer Buy Back: It is highly unlikely the developer of a residential buy-to-let property would ever offer investors a guaranteed buy back after a certain period had lapsed. However, most hotel room investments offer a guaranteed buy back after year 5. This contractual agreement allows the hotel developer to regain ownership of the hotel freehold in order to either continue running the business or sell the hotel on. Generally the buy back can be executed by either party with 24 months notice required.
Usage: Whilst most property investors are unlikely to ever move into a residence originally purchased as a buy-to-let and forfeit the rental yield they would otherwise receive, the option is always there for them if they so wished. With a hotel room investment, whilst the ownership is likely to include a certain number of guaranteed nights to use for personal usage free of charge, the owner is not able to occupy the property on a full-time basis.
How to buy a hotel room
The process of buying a hotel room as an investment is a straightforward property transaction with purchases up to £150,000 avoiding any UK Stamp Duty whilst often still providing the investor with a lengthy lease and legally registered title deed. For most investors, a summary of the process of purchasing a hotel room will follow these steps;
- Identify developers with a successful track record in delivering projects and who work with established hotel management companies.
- Conduct due diligence into the hotel’s business case.
- Consider how the cash input, rental income, potential capital growth, risk and exit plans match your investment goals.
- Calculate the value of any additional benefits being offered such as personal usage.
- Once satisfied, request reservation paperwork and pay a deposit.
- Chose a solicitor to act on your behalf who will carry out necessary checks as per UK conveyance law.
- Once ready to proceed, exchange contracts and transfer balance.
- Upon completion title of your hotel room will be registered with the Land Registry.
Select Portfolio conduct due diligence and use our expertise in the sector to work only with developers and projects we believe offer investors the best opportunities in this sector.
Hotel rooms for sale
Select Portfolio are pleased to offer a fantastic UK hotel room investment opportunities, where investors are able to benefit from extremely low entry-level prices, that offer excellent returns for a guaranteed period, from a completely passive investment.
Select Portfolio offers a selection of hotel room investments that offer investors hands-off property investments with long leases and high yields. The hotel rooms offered for sale have passed a strict and thorough due-diligence process to protect the security of the investment, and are all owned and operated by experienced hoteliers with proven track records.
Hotel room investments in London
Whilst demand for hotel room investments in London remains high, the growth in yields per room produced by regional hotel rooms across the UK provide opportunities with greater value, and higher ROI.
As a result, Select Portfolio choose to shortlist hotel room investments in cities across the UK, that are still experiencing high demand for short stay accommodation. These cities also offer lower purchase and operating costs, high capital growth and reduced competition.
For more information on hotel investments in London in click here.