Why Invest in Hotel Real Estate?
If you’re thinking of expanding your real estate portfolio, hotels and resorts are an investment worth considering. Though not as widespread as other commercial real estate (CRE) asset classes, hotel real estate has a unique operational nature. What’s more, becoming a hotel investor has significant financial and social benefits. So, if you are still on the fence about getting into this CRE type, here are 11 reasons to invest in hotels.
How To Get into Hotel Real Estate
Before we get into why you should invest in hotels, have to say it’s crucial to understand the different ways to venture into the hotel business. There are four primary ways of becoming an investor:
- Hotel purchase – This investment approach is the most obvious. However, it can be challenging because you may need to invest thousands of dollars. Moreover, because it’s not a passive investment, you will need to get involved with the day-to-day hotel operations.
- Crowdfunding – As an individual investor, you may not have the capital to tap into an opportunity. Fortunately, you can raise this money with the help of other investors, giving them an equity interest in this investment deal.
- Choosing real estate investment trusts (REITs) is another viable option. Here, a company will amass money from different members then invest in multiple hotel CRE assets.
- Investment via hotel brands stock – Hotels like Hyatt and Mariott trade on global stock exchanges like NASDAQ and NYSE. Due to their established brands, choosing to invest in their hotel stocks can be a meaningful financial option.
11 Reasons to Invest in Hotels
Here’s why you should consider investing in hotel real estate.
- Financial gain – Hotel investments, primarily under long-term ownership, typically result in massive cash flows of up to 12% and are an excellent way to build your equity.
- Hotel real estate can be a high-risk investment. Even so, with strong asset management, the returns will significantly limit your risk.
- Hotel investment can be highly tax efficient. Properties in real estate tend to have a high depreciation rate. Because the US laws allow you to include a depreciation expense, this can help reduce your taxable income. Furthermore, you also get a tax-free exchange benefit which usually boosts an investor’s income potential.
- Investing in hotels offers cost control. With a strong property management team, it’s possible to keep your service costs stable regardless of a change in revenues, giving you a robust profit ratio.
- Inflation hedges are another reason why hotels are a great investment option. Hotels tend to appreciate to a considerable extent as compared to average inflation.
- Hotels offer various opportunities to diversify. For instance, with co-working becoming increasingly popular, hotels can tap into this opportunity to fill up their conference room facilities and potentially amplify hotel room demand.
- Hotels offer flexibility in terms of value enhancement. Depending on your ability, you may opt to focus on a single level, such as renovations or even customer loyalty, and get an excellent ROI.
- Becoming a hotel real estate investor gives you a chance to positively impact the community through job creation and facilitating social connections.
- Hotel investment can offer you a chance to fulfill your career passion.
- Hotels can serve as family heirlooms that set you and future generations up for life.
- Hotels are a high-profile venture that can offer non-economic benefits such as expand your networks.
Work with a Commercial Property Agent
Investing in real estate can be a fulfilling endeavor with massive economic gains and social benefits. The best part is that owning a hotel investment property is no longer a pipe dream.
Anthony Maccaroni has inside knowledge of the hotel and motel real estate world and can help you realize your dream of adding hotel real estate to your investment portfolio. Looking to invest in hotels? Please feel free to contact Anthony at 727.641.0271 to schedule a free consultation.