Why Should Hotel Rooms Be Your Next Property Investment?
When you think about investing in property, the typical property types that would come to mind are houses and apartments or flats. Residential property for sale in Dubai, for example, certainly sounds like a lucrative option that a serious investor would look into.
After residences, commercial properties, such as an office or store, might be the next options you would consider.
But did you know that you could also invest in hotel rooms?
For those seeking a shorter-term, low-risk and high-reward investment, hotel rooms are proving to be the popular choice.
What is hotel room investment?
The concept of purchasing hotel rooms has been around for a while. Many major hotel chains use it as a means to purchase and finance new hotels.
The easiest way to understand how hotel room investment works is to think about a buy-to-let property investment. Here, you buy a piece of property not to live in it, but to rent it out to tenants. However, buy-to-let properties would normally have tenants living in the place for the long term, or years; with hotel rooms, the stays would be shorter. The "tenants" are hotel guests on holiday or on business trips.
The hotel room you purchase will be fully handled by the hotel management team — they are in charge of maintaining the quality and cleanliness of the room, advertising, booking, and collecting the “rent.”
You, the investor, will receive a guaranteed monthly income of around 10 percent. The typical investment period is about five years; at the end of this term, you have the option to sell the room back to the hotel management team (which usually comes with capital growth of up to 15 to 20 percent). You could also renew the investment with new terms.
Should you decide to sell the hotel room back before the end of the agreed-upon period, you will not get your full investment back.
What are the benefits of investing in hotel rooms?
1. Low entry price compared to other investments
The lower cost is perhaps the first thing that will entice you to buy a hotel room. The money you pay to purchase the room would be roughly the equivalent of the deposit you would pay for another type of property. To determine potential monthly payments, downpayment amount, interest rates and other essential information for a property you’re interested in, use a mortgage payment calculator.
2. Zero maintenance costs and administrative responsibilities
A hotel room is a hands-free investment because you would not have to lift a finger to keep the property in excellent shape, or be involved in its upkeep in any capacity. The hotel management and staff take care of everything, from repairs and maintenance to dealing with the hotel guests. You simply have to wait to receive your monthly income.
3. Guaranteed income
Once you complete your purchase of the hotel room, no further payments need to be made, and there are no hidden fees. What's more, you are sure to receive your monthly income regardless of how the hotel room performs.
4. Buy-back option as an exit strategy
As the end of your term approaches, you won't have to stress over how long it will take you to sell the hotel room and how much you will make from it. Part of the hotel investment contract is the buy-back agreement, which means the hotel will buy the room back from you with assured appreciation of around 15 to 20 percent.
You can also choose to renew the terms so you can continue to earn rental income for several more years.
5. Opportunity to diversify your portfolio
A hotel room makes a refreshing addition to your property portfolio. Houses, apartments and retail spaces are typical investments, so a hotel room can introduce some welcome variety.
Also, a hotel room investment allows you to invest across business and property types as well as various geographical locations. This presents a way to protect your investments since you can avoid economic downturns in single locations.
Lastly, because of the more affordable entry price, you could potentially purchase more properties and considerably increase your returns.
Consider investing in Dubai hotel rooms
If you’re ready to give this a try, securing a hotel room investment in Dubai can be a powerful financial strategy. Dubai is one of the safest cities in the world, it is a continuously growing business and tech hub, and it boasts thriving tourism and hospitality industries.
All this means that hotels in this part of the world have high occupancy rates thanks to people from across the globe continuously coming here for business and leisure. Investing in rooms in Dubai's internationally renowned hotels, partnered with trusted real estate developers, offers a rewarding way to earn significant income.
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