How cool would it be to own a hotel? More so than a rental house or commercial storefront, it’s a glitzy asset that just screams prestige … especially if the hotel in question is an upscale five-star crown jewel in the hands of a Blue-Chip brand-name management company.
For most investors, though, buying a hotel is out of reach. Investors with shallow pockets typically had four choices to buy exposure to lucrative luxury hotel revenue:
- Pool money into a syndicated or crowdfunded acquisition.
- Buy shares in a hotel-focused REIT.
- Buy stock in a management company like IHG or Red Lion.
- Buy the hotel outright—usually reserved for the very wealthy.
But what if you didn’t have to buy the whole hotel? What if you could just buy one hotel room and own it individually, like a condominium in an apartment building?
Is such a thing even possible? Can you invest in a single hotel room in a resort or hotel complex? The short answer is yes. In the real estate industry, these are known as condo hotels.
Hotel rooms boast higher occupancy rates and greater monthly returns than regular condominiums. Click here for 5 reasons why you should invest in hotel rooms instead of condos.
How Buying a Hotel Room Works
Hotel managers and developers all over the world sell condo hotel rooms to individual investors or groups.
Some condo hotels are new developments. Investors buy rooms at the market rate and usually bear no exposure to costs until the hotel opens, at which point the room might be worth much more than it was when it was just a picture on a blueprint. Condo hotel owners may sell rooms to help finance the completion of the project with no debt service payments, since they owe the owners no revenue until the hotel opens.
Other condo hotels sell rooms in completed hotels, possibly to finance renovations or future projects.
Condo hotel agreements may have a minimum holding period requirement that owners have to abide by, or incur early-sale penalties.
Some condo hotel agreements include a buyback clause, entitling the management company to buy back the room at the end of the holding period at an agreed-upon price. This can be a great way for investors to reduce their risk and lock in a predictable return.
Other condo hotel agreements allow the investor to resell the room at any time. Reselling the room on the open market at a larger profit can be very lucrative if the hotel itself is managed well and generates good income.
Usually, the condo hotel has management in place, possibly a major brand tasked with filling the rooms and maintaining or increasing the hotel’s Revenue Per Available Room (RevPAR). Each room owner is entitled to a share of the profits realized by the operation of the hotel.
The management company is in charge of marketing, maintenance, guest relations, and operations. The room owners’ only job is to watch the revenue roll in.
Hotel room owners sometimes have the option to book their own room, often with first right of refusal on available nights. The condo hotel may even have allowances for room owners to manage their own investment, renting the room themselves like a long-term condo property or a short-term rental like an AirBnB or VRBO.
However, other condo hotels require room owners to subject their ownership interest to the contract hotel manager. This is often the more profitable and less risky option anyway, especially if the management company is reputable and offers a “guaranteed return” or buyback option.
In the case of Ruebush Hospitality Group, this is exactly what you can expect. We require that the room is always managed as part of the hotel because this produces the best return on investment for you as an investor, and makes the investment much less risky.
Advantages of Buying a Hotel Room as an Investment
Low Barrier of Entry
Whereas other commercial real assets may start in the multi million-dollar price range, hotel rooms typically range from $100,000 to $1,000,000. This is much more in the price range of average investors, and financing may be available. Some hotel rooms can be bought for much less, and financing may be available.
In the case of Ruebush Hospitality Group you can expect extremely high quality rooms at much lower than standard market prices and we offer in-house financing for up to 24 months without any interest charges. We also guarantee you will earn a MINIMUM of 16.5% yearly return on your investment and we guarantee a buy-back offer of a MINIMUM of 110% over what you invested.
Access to Upscale Property
Investors who can’t afford a luxury house or condo may be able to afford a luxury hotel room. The luxury hotel market has proven over time to be more resistant to recessions than mid-market or budget hotels.
With professional management on the job, hotel rooms represent an opportunity for true “mailbox money,” a turnkey, management-free real estate investment.
In the case of Ruebush Hospitality Group, your investment is 100% hands-free. It is a completely passive investment. We take care of every single detail. All you do is invest, use the hotel room any time you want for FREE, and the rest of the time you receive your monthly income.
Potential Tax Advantages
Tax implications of hotel room investment vary based on the country or state where the asset is located, as well as the country or state of residence or incorporation for the buyer. However, commercial real estate often enjoys privileged tax treatment compared to residential real estate—and buying hotel rooms is one of the least expensive ways to buy commercial real estate.
Risks of Buying a Hotel Room as an Investment
Risk of Loss
If the hotel fails, either due to a decline in RevPAR or a construction project that stalls, the management company may not be able to fulfill its return or buyback guarantees. In the event of catastrophic failure, any deposits or down payments may be lost as well.
The most important part of the buyer’s due diligence in buying a hotel room is to scrutinize the management company. What is their track record? Are their other hotels successful? What is the RevPAR of other hotels they have under management? Do they complete their build projects? Do they have cash and access to credit?
This is why Ruebush Hospitality Group is a company you should consider. We have absolutely zero debt and we have a proven track record of producing extremely high profits for over 9 years. As a matter of fact, we produced profitable returns for our investors even during the 2020 global pandemic. We have millions and millions of dollars in real assets, zero debt, and a long-term record of successful and profitable operations. Your investment is safe, secure, and guaranteed when you invest with us.
Lack of Control
Whereas other commercial real estate assets afford the investor the opportunity to pick their management team and make critical management decisions themselves, buyers of hotel rooms cede a lot of control in the management of the asset to the management company.
Again, investors must do their due diligence on the management company. Replacing a management company is possible, but it often requires difficult and cumbersome consensus-building among the room owners.
And again, this is why Ruebush Hospitality Group is such a great choice! With a track record of producing very high rates of return for hundreds of investors, we offer the security and dependability you need when making this type of investment.
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