You have probably heard a lot that property investment is an excellent way to both preserve your savings and earn additional money. What you probably haven’t heard is that not all properties can make it possible.
Here I’m going to tell you why buying hotel rooms for investment might be a much more appealing option than buying residential property.
To Live in or Make Money
Let’s make it clear. Purchasing a house or an apartment in another city or even abroad is totally Ok if you aim to move to a new place, i.e. use the property for yourself. It’s still an investment because it’s an asset that can rise in price over time.
But that’s about the only way to make money on such investments. If you want to have a regular income source, you’ll have to rent it out. And that’s where your problems start.
What does a typical landlord do?
- Searching for tenants;
- Negotiating and signing a contract;
- Keeping the property clean;
- Renovating once in a while.
Sounds easy? It is – if the real estate is located in the same city you live in. But if you bought a property abroad, that’s going to be a pain in the neck. Not to mention all the money you’ll have to waste on traveling.
What You Get for Buying Hotel Rooms for Investment
So investing in a hotel room is a good alternative for those dealing with foreign real estate markets. Why?
- In most cases, you can purchase a room from a respected developer that collaborates with well-known hotel operators.
- After buying a room, you sign up an agreement with such a company to share the profit.
- A hotel working under a well-known brand attracts more visitors than less famous local firms, which guarantees high returns.
- Besides, all the management issues including promotion and attracting guests fall on the shoulders of your hotel operator.
- As a result, you have to do literally nothing to make money on this investment.
- Often as part of the agreement, you get free staying in your room for a couple of weeks a year as a bonus.
How’s that? Sounds too good to be true? Indeed, this scheme has its flaws.
Watch Out for These Factors Before Deciding to Invest
Tourism Hubs Only
The hospitality industry is closely related to tourism. The more visitors a city attracts, the more revenue local hotels make. But if you invest in an old motel on an abundant road in the middle of nowhere… Well, let’s just say there are more exciting ways to throw money down the drain.
So buying hotel rooms for investment works only in highly popular areas such as well-known resorts and business hubs.
It’s Always about Money
This drawback is probably obvious. Such properties aren’t cheap. Of course, it’s still better than saving up a fortune to buy the whole building or build your own hotel. Besides, even if you do have this money, it’s safer to diversify your investments between a variety of similar or different assets of the same total value. But still, keep in mind that a hotel room usually costs more than an apartment.
Lastly, since you voluntarily give the reins of government to a hotel operator, you’ve got no control of such an asset. All you can do is resell it later. Some consider it to be a serious drawback because they prefer keeping their eye on the ball. On the other hand, lots of people use asset management of some kind, and this one is no different. Especially, if you have no idea about how to manage a hotel.