With a global industry market size of over $600 billion, it’s no surprise that investing in a hotel is one of the best ways to put more money in your pocket as an investor. Whether you’re new to investing or a long-time veteran, placing your bets on a hotel could earn you millions of dollars in the long run.
While the COVID-19 pandemic may have put a momentary stop to hospitality services, the future of investing in hotels has never been brighter. As you prepare for the tidal wave of travelers once vaccine rollouts are complete, keep these essential tips in mind to ensure success.
Considering Buying a Hotel?
Buying a hotel is a good investment for most, but it’s important to note that this investment method won’t be passive.
For starters, you’ll need to cough up a fair amount of capital to cover upfront costs. Once this is taken care of, it’ll rest on your shoulders to manage the hotel’s operations from afar. While you can always hire employees to manage daily operations, you’ve essentially just started a business — expect to handle a few tasks of your own.
Investing in Hotels Right Now
Investing in hotels doesn’t always require an outright purchase; you can still reap the benefits with alternative methods, including real estate investment trusts (REITs).
When you invest in a REIT, your cash works in tandem with a larger pool of investor money; these funds are invested in a portfolio of various real estate assets, often traded on major stock exchanges. As such, these are one of the simplest investments you can make.
Investors can enjoy a few choices regarding REITs, as dozens specialize in specific hotels, areas and more. Since these groups primarily do their trading on major stock exchanges, you can sell or buy at any time that suits you, making it an excellent option for investors who want quick income.
Want the Biggest Earnings Possible? Fund A Hotel
The word “Crowdfunding” is often reserved for smaller products, as seen on sites like Kickstarter, but these campaigns can be far more important.
While still a relatively recent investment method, many hotels have offered investors the chance to “fund” their construction in exchange for an equity interest. If done successfully, this route is a win-win for both parties; the hotel company receives enough capital to get their project off the ground while you pocket a portion of their profits.
However, keep in mind that crowdfunding is often exclusive to accredited investors: Individuals with a net worth of least $1 million or a minimum annual income of $200,000. Another factor to note is that this isn’t quick income; some crowdfunds can have “holding periods” of a few years.
Despite its few roadblocks, crowdfunding tends to produce some of the most extensive profit margins. If you have a sizeable income and are considering investing in hotels, this could very well be the best step to follow.
Common Questions For Investing In Hotels:
How Does Investing in a Hotel Work?
Investing in a hotel typically involves purchasing a property or a share in a property, then earning revenue from hotel operations. Investors make money from room bookings, events, and other services. Returns depend on occupancy rates, operational efficiency, and market conditions.
How to Get Investors for a Hotel?
To attract investors, prepare a solid business plan, highlighting the hotel’s potential profitability, location, market demand, and management strategy. Networking with real estate investment groups, attending industry conferences, and using crowdfunding platforms can also help.
What Are the Steps to Buying a Hotel?
1. Research and Planning: Understand the market, location, and financial feasibility.
2. Secure Financing: Obtain necessary funds through loans or investors.
3. Conduct Due Diligence: Inspect the property, review financials, and check legal requirements.
4. Negotiate and Make an Offer: Discuss terms and make a formal offer.
5. Complete the Purchase: Finalize the deal, secure licenses, and transition operations.
Hi! We’re Josh and Jolene Baijot, the creators of this website. We’re also commercial real estate brokers in Bellingham, Washington. Thank you for taking the time to read this blog post. We appreciate your time spent on this site. You can connect with us on Facebook, Instagram, or contact us through this website.
