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What's wrong with buying a hotel with a long lease in place?

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  1. #11

    Join Date
    Feb 2011
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    Hong Kong
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    Quote Originally Posted by Kowloon Goon:
    Just to confirm... I get a lot more than 7% on my US property.
    My worst performing property is generating 30% on rental. I rent all properties out fully furnished. Property appreciation on a few are 30-50% per year. But I am an active investor and do daily research for great deals.
    Kowloon Goon likes this.

  2. #12

    Join Date
    Jul 2010
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    542
    Quote Originally Posted by john_1122:
    I came across a few hotels on sale with a long (10-20-30 years) lease in place. The return on investment is high (7% or so) and is adjusted for inflation yearly or every two years. I can see potential problems with 1) the hotel losing money, and the managers just leaving, and 2) the managers not taking care of the building starting a few years before the lease expires, which would require extensive refurbishment.

    However, over the time of the lease the price of the building would keep increasing, and after 20 years or so you have a building that is worth double as much.

    Does anybody have any insights into this business sector?
    News papers are always full of such things. be careful, check reputation and past records first. Yield should not be the prime decision making factor.
    shri likes this.

  3. #13

    Join Date
    Feb 2005
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    Manchester, UK
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    Quote Originally Posted by MandM!:
    My worst performing property is generating 30% on rental.
    adding MandM to list of people to kidnap and hold for ransom

  4. #14

    I've been looking into Singapore REITS which return 5 to 8% and I believe (although need to confirm) have no dividend withholding in SG and are not taxed in HK.

    Other than that, plenty of properties in Ireland (I'm from there) offering 8 to 10% gross yield at the moment and Ireland and HK have a tax treaty as well.

    shri likes this.

  5. #15

    Join Date
    Mar 2009
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    Hong Kong
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    If you have never worked in the hotel industry, you should consider a lot of factors before investing.

    Operating a hotel requires a large amount of upfront capital which normally takes a long time to recoup. There are a lot of risks involved e.g. competitors, airbnb, and even those affecting the whole market, not just your hotel, such as exchange rates, tourism to your location, the local attractions etc.

    The tourism industry is usually seasonal, so be prepared for some months when you are loss making.


  6. #16

    Join Date
    Oct 2018
    Posts
    487

    The hotels I was looking for are in Australia, and I found them on some website (like businessforsale, or something like this). Now I can't find the website (I bookmarked it on a computer I don't have access right now). I think with the very weak AUD, that would be a very good return, though of course there are many risks, as many of you wrote. Thank you for your feedbacks!