Hotel Room Investment. Any thoughts on this?
Back to Forum- This topic has 6 replies, 5 voices, and was last updated 25 Nov 2014
at 11:00 by MartynSinclair.
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LuganoPirateParticipantI’ve been sent an offer to invest in a hotel by buying a room on the Greenwich Peninsula. The hotel is run by Accor and the guaranteed first year return is 8%. I don’t think there’s any guarantee on the future years.
The cost is +- £150,000 with staged payments until completion in january 2016.
I can’t see from the brochure anything about capital appreciation or how to exit the investment.
Do any other posters know about these investments and has anyone put money into one and what was your experience? I’d be grateful for any info.
25 Nov 2014
at 07:43
Charles-PParticipantI looked into this in 2012 for an investment in a property in Edinburgh. By far the biggest problem is the rate of return after the first year, I too saw numbers promised of 8% in the first year but I understand these can quickly fall to 2-3% in subsequent years. Exit is straightforward providing you can find someone to buy it but as by then the returns are low that can prove tricky.
25 Nov 2014
at 08:47
SimonS1ParticipantI work in the investment industry. There are a lot of these schemes around including hotels, student accommodation etc.
Things to look into include:
1. Who the 8% “guarantee” is from and how long it lasts
2. Whether your capital is protected
3. What happens if/when you want your money back – any penalties etc
4. How long you would have to wait for your money (often 90 days plus)
5. What the structure is (fund?), where it is based, and whether you have any regulatory protectionThere are some genuine schemes and a number of property investments where people have been unable to get their money back.
25 Nov 2014
at 08:52
BigDog.ParticipantAm in agreement with Simon, if there isn’t an open secondary market then put the offer in a med to high risk category in your portfolio.
Medium – as long as Accor is underwriting/ guaranteeing a secondary market. If it isn’t then it is as risky as a time share.
Both sides of the hotel sector (the estate development and the room return) appear strong across most of the globe.
Accor has the largest portfolio and is imo one of the leading game changers in the sector and would expect a stronger return than its competitors.
25 Nov 2014
at 09:44
MartynSinclairParticipantI was involved with the One Westminster Plaza Hotel building assisting a client who had purchased a “leasehold interest” for £212,000 with a promised 6% return.
This was purchased offplan, at a property exhibition in Singapore, where clients were making decisions on the day, with a UK solicitor present!
Between exchange and completion there was a time lag of 2 years and the promised mortgage (dependant on market conditions clause) never materialised.
One problem that has not yet been mentioned is the lease provided no common area’s beyond the door of each unit (well it was a hotel).. this could cause problems with access at a later date.
Also check the annual management charges, for presumably just the room upkeep, after all, there is no common area….
Clients were hoping to invest via their SIPP’s (pension) for tax free growth. I now some succeeded to do this, whilst others failed.
Key for this kind of investment is the exit strategy, but I am not sure one exists…
25 Nov 2014
at 10:40 -
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