In the last of this series on investing overseas we’re going to deal with apart-hotels, called ‘condo-hotels’ in the US and ‘serviced apartments’ in the UK, which have been around since the 1970’s. They are experiencing renewed interest across Europe in the past few years as hotel operators explore new routes to circumvent the capital intensive nature of owning their own property portfolios. Essentially you purchase a room or unit in the hotel which then gives you a cut of the profit made by the hotel.
The units come fully-furnished, are maintained to hotel standards and are managed and marketed on the purchasers’ behalf, making them relatively hassle-free – which appeals to Irish investors – while still being a freehold property. As the units are generally quite small the entry levels can often be quite affordable, from around €75k with borrowing normally available at around 80% LTV. The rental returns can also be attractive, at up to 8% Net, although many deals involve a percentage share of hotel profits, meaning that returns are not guaranteed. Included in the deal can be a level of use at that particular hotel, or in other related hotels worldwide – but with reduced rates of return.
If there were to be a query about such investments it would reside with the residual value of a room/suite in a hotel down the line. It restricts your exit market to investors and capital gain may not be all that it would be with traditional property. Investors are often prepared to accept this on the basis that the cashflow is attractive. The strength of the hotel chain offering the guarantees is an important factor to keep in mind as is the location and desirability of the hotel in question. In general, though, apart-hotels can be a reasonably attractive investment product.