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The guest way to do buy-to-let?

27th November 2007 | back to article listings BACK    print this article PRINT

Buy-to-let has come a long way since the term was first coined in the 1990s. It's not just that the market has grown massively during that time, or that savvy investors have enjoyed large returns; the market has also seen diversification in all manner of ways.

Where once the market was about houses and flats, now new schemes are emerging, one interesting new venture being buy-to-let for hotel rooms.

This has been launched by Guestinvest, a buy-to-let hotel company launched in 2004 which works on the basis of selling individual rooms to investors. The firm started with the Guesthouse West in the west London district of Notting Hill. Now it is to launch another such venture near Paddington Station. As This is Money stated at the time, the investment works by allowing those who buy a room a 50 per cent share in the income generated from the room, along with the right to use it for up to 52 days a year for just £10 a night.

Johnny Sandelson, the chief executive officer of Guestinvest, explained that this type of investment appealed to three classes of investors: lifestyle investors who enjoyed having a room in a central London location, those simply after financial gain and those investing as part of a self-invested personal pension (Sipp). However, this last option does have one disadvantage: "Investors who purchase a room through a Sipp are unable to stay for free and must pay commercial rates to stay in their room in order to qualify for the tax benefits associated with Sipp investments."

However, Mr Sandelson explained, the returns were good, with those who paid £235,000 for a room in the Notting Hill hotel "guaranteed a six per cent return during the hotel's first year of operation." Furthermore, he added, "Investors have earned in excess of eight per cent in the first two years of ownership, with those who have since sold their rooms netting a minimum capital growth of ten per cent."

All in all, Mr Sandelson suggested, this was a good way to invest, with the hotel industry likely to outperform the commercial property in the next few years and the lack of any need to manage the property making it "hassle free".

The company is certainly looking to expand further, with CatererSearch reporting that it is planning to develop two more London hotels in this fashion - the Nest in Bayswater and the Chiswell Street Hotel in the City.

If buy-to-let hotels take off, it will be no surprise to see other companies following, with this novel sector in the industry perhaps becoming the new way to enjoy a good return on investments.

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