Investing in a hotel can be very different from investing in traditional avenues of real estate. However, with the right research, investing in a hotel can also be a very lucrative and reliable investment. Of course like any investment there are pluses and minuses. In this article we are going to take a look at some of the specifics of investing in a hotel and whether it is a wise decision.
First of all it is good idea to take a look at the different sectors within the hotel real estate market. Of course we are all familiar with some of the famous hotels like the Marriot and the Hilton. These properties are part of larger hotel chains, owned independently by big investors with separate companies managing their operations. This is a very complicated sector of the industry. In this article we are going to focus on small to medium sized hotel properties. These properties typically have a less complicated operation system and are easier to invest in.
On first impression it may seem that a hotel is far more expensive than some other forms of real estate. However, it is surprising that some small to medium size hotels can come at a reasonable price. Also, the cost of the hotel is always going to be relative to the income it can produce. For example, a small hotel with a reasonable price tag that has had a reputation for consistent returns could potentially be a very wise investment. It is also possible to apply for a commercial real estate loan when investing in a hotel. This type of loan means that the bank or the financial institution does not look as much at your personal finances but at the potential income of the property.
Potential investors may be put off by the idea of managing a hotel, it could seem like a very complicated operation for someone with little experience. With this concern in mind, it is possible for investors to search for listings that include an operations manager or property manager. Although this would eat into the overall profit of the property, the return may still be significantly worthwhile. It also means that the owner is somewhat receiving a passive income.
What are some of the factors when finding a good listing? Obviously the financial performance is the first sign of whether a hotel is a good investment. Additionally, it is crucial to look at common sense factors, for instance, where is the hotel situated? Aspects like location, convenience and tourism are very important when analyzing whether a hotel is potentially a good investment.
Let’s take a look at an example. Hotels in San Diego or neighboring areas in California are prime real estate. The tourism industry is strong in this state and a hotel could potentially be accessible to tourist epicenters like the San Diego Zoo or Sea World. It is worth checking for listings of hotels for sale in California and similar locations.