Offering much higher yields than buy-to-let properties, apart-hotels are showing the early signs of overtaking this type of property investment driven by a global desire and need for hotel accommodation rather than the residential letting markets.
Alistair Powell, managing director of Seven Continent Investment (7Ci) said in the last two months alone he has sold 100 separate units, at home and away: There are three key reasons why buyers are keen to invest in apart-hotels: Firstly its a completely hands-off investment the developer builds the hotel and the management company runs it. Their job is to operate the hotel, maintain it and ensure maximum room occupancy and as they receive a percentage of the nightly room rate, they are motivated to do so.
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Secondly, because investors income is a percentage of the nightly room rate rather than a monthly income from a rented property, they are not exposed to substantial monthly deficits.
From a financial perspective, the income level compares favourably with traditional buy-to-let. Generally, expected income levels are sizeable 15-20 per cent would not be unusual in a well-selected apart-hotel. If suggested income levels on a development are much below 10 per cent, 7Ci would not consider promoting it as it would not represent a good investment opportunity for our clients.
At present in the UK, a lot of major regional towns lack hotel rooms, meaning that occupancy levels in every development are likely to be high and therefore the investment shows fantastic potential for returns especially as mortgages on apart-hotels are set to become more common over the next few months.
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Most of 7Cis customer base is made up of established UK property investors who are looking for a UK product with a higher yield and no operating deficits however the ivestment is also attracting a good deal of interest from first-time buyers looking to establish themselves on the property ladder whilst making a yearly income on top.
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