It’s easy to see why buy-to-lease luxury hotel investment is rapidly gaining popularity among discerning investors around the world. Besides offering fixed or variable yields and being highly tax efficient, it provides investors with a pre-planned, fully managed exit strategy.
Nikki Beach Hotel & Spa Phuket.
Imagine
owning a piece of
your favourite hotel that also offers lucrative returns year on year. Sounds like
a dream? Well, that dream can now become a reality if you choose to include
hotel rooms in your investment portfolio. Although this type of investing is
still considered to be a relatively new concept in Singapore, as compared to
foreign markets like the United States, New Zealand and Australia, industry
players observe that hotel investments are gaining popularity among investors in Asia.
Recent statistics show that in 2013, 218 percent more capital was invested in
hotels in Asia compared to the previous year.
This
significant increase in hotel investments can be partly attributed to the
additional buyer’s stamp duty (ABSD) on residential purchases and other cooling
measures imposed by the government, which are diverting the attention of property
investors.
Analysts
add that investors are not only enticed by the idea of owning a piece of
world-famous properties, such as the glitzy Ritz Carlton, the Plaza Hotel in
New York or the Nikki Beach Hotel & Spa Phuket, but this form of investment
is also considered to be relatively low-risk. It is the perfect solution for those who
prefer hassle-free investing as the hotel operator manages everything including
the leasing, accounts and maintenance of the room for you, as opposed to owning
your own apartment, where you are responsible for every little detail as a
landlord.
Chris
Comer, CEO of Castlewood Group, sheds some light on this alternative investment
offering.
"For the
longest time, property has been the top choice amongst investors as it is considered
to be a safe and rewarding long term investment. In recent months, property
investment has lost some of its appeal due to prices escalating sharply;
furthermore, the cooling measures imposed by the government have also made
property investing out of reach for many.
"As
a result, hotel investment, particularly Buy-to-lease luxury hotel investment
has become extremely popular among investors for a number of reasons." shares
Comer.
PERKS OF HOTEL
INVESTMENTS
1. Non-reliance
on the overall property market
Experts
say that the financial success of a luxury hotel is related to the hotel
location, star rating and room rates therefore unaffected by the conditions of
the property market.
2. Hassle-free and
fully managed
Residential
properties, as an investment, present a number of hassles, from finding a
tenant through to having to pay for property repairs and renovations; the
issues are endless.
Buy-to-lease
hotel investment, on the other hand, eliminates these inherent hassles. The
whole idea of hassle-free property investment, with no maintenance, marketing
or management from the investor is to many a true godsend.
3. Annual returns
and exit strategy
Buy-to-lease
hotel investments offer extremely attractive returns. Firstly they provide
investors with return options based on room rental; fixed returns or variable
returns. The revenue less the operating cost leaves a balance payable to
investors, and in some hotel investments; a fixed return option is available.
Secondly,
there are returns at the point of exit.
A pre-determined strategy highlights how you as an investor can
liquidate. Many exit strategies are based on developers selling the hotel after
it has built substantial business records. This way the hotel is not only sold
as an asset, but as a business too – maximising the resale value.
4. Tax free returns
In
Singapore, the owner of a residential property that has been purchased for
investment purposes is required to pay income tax. However, income derived from
overseas is tax-free.
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Chris Comer is a commentator on property investment, both at home and overseas and has been featured regularly on Channel News Asia, The Business Times and The Straits Times. For To |