Investing in Hotels 101: What You Need to Know
Real estate investment has been a well worn path to wealth for so many people. From flipping homes to investing in commercial building projects, real estate offers a wealth of possibilities. One of the lesser known real estate investment opportunities are hotels. That’s right. From 5-star resorts to roadside motels, these real estate investments can be reliable income generating machines.
The good news is that there are a number of ways that you can invest in hotels. Here's a look at the four most popular paths for hotel investing.
1). Purchase a Hotel
The most direct way to invest in a hotel is to purchase a hotel yourself. This will likely be the most involved and time intensive investments of the four options listed here. If you purchase a hotel, you will have the option to operate the property yourself or to hire someone to operate it for you.
So how much does it cost to purchase a hotel? The prices can range from about $400,000 for a rural motel with about a dozen rooms to well over $10,000,000 for a large hotel with over 200 units.
Bear in mind that if you open a hotel, you will have to get a hotel license from the state where the hotel is located.
2). Invest in a Crowdfunded Hotel Investment
Another great way to invest in hotels is through a crowdfunded program. Here, you will pool your money with other investors in order to purchase a hotel. The fund or the company that will purchase the hotel will collect a fee for handling the investment and pay out either a monthly or quarterly income to the investors.
If you are considering an investment into a crowdfunded hotel project, then it is critical that you do your due diligence and make sure that the head of the fund has experience in purchasing and operating hotels. Also, be aware that you can risk losing some or all of your investment.
3). Buy Stock in a Hotel Company
An easy way to invest in a hotel or hotel company is to simply purchase a hotel stock. There are many well known hotel brands that are publicly traded on U.S. stock exchanges. Some of the top publicity traded hotel stocks include the following:
Hyatt Hotels (H)
Marriott International (MAR)
InterContinental Hotels Group (IHG)
You can research how well these hotel companies are doing by visiting their investor relations site and reading their annual reports. You can also look at their quarterly earnings report to get an update to look at their financials.
4). Buy a REIT that Owns Hotel Properties
Finally, you can invest in a Real Estate Investment Trust or a (REIT) that owns hotels. REITs can be purchased much like a stock. However, REIT operate under a different set of rules. REITS must distribute at least 90% of its taxable income per year. That makes REITs a great option for those who want to generate an income from their investments. Some of the top REITs with hotel investments include the following:
Ryman Hospitality Properties (RHP)
MGM Growth Properties (MGP)
Park Hotels & Resorts (PK)
Getting Started With Hotel Investing
Hotels can be one great way to invest in real estate thanks to their potential to generate a reliable income. Consider each of the four hotel investing approaches. However, be sure to talk to a financial advisor before making any investment decision.
REFERENCE:
https://www.millionacres.com/real-estate-investing/articles/here-are-4-ways-you-can-invest-hotels/
