Registered: 1489516220 Posts: 10
Reply with quote #1
I have heard about investing in hotels lately. Does anyone know about them?
Registered: 1150855007 Posts: 943
Reply with quote #2
You should compare the returns you get with a hotel to other businesses. You could have up to three shifts of employees a day. Front desk clerks, maids and maintenance people. Not a "passive activity". Skipping out on the rent could be considered "defrauding an innkeeper" which can be a felony. Certainly no 30 or 60 day evictions. There is a real estate component to hotels, but this is true about many businesses.
Registered: 1451969813 Posts: 21
Registered: 1110698106 Posts: 1,048
Reply with quote #4
A discussion of airbnb and VRBO here in San Diego might be interesting. I wonder if that's a way to extract a reasonable cash flow from otherwise low cash flow areas.
Registered: 1491294092 Posts: 3
Reply with quote #5
I guess that would depend of what type of hotels. If you meant like a vacation rental then I think you have to join a site that could protect your place too.
Registered: 1156877376 Posts: 2,048
Reply with quote #6
Hotel investments are investments in a business and I would tend to think of the real estate aspect as almost incidental. And it's a very complex business to run---and if you don't have experience with this kind of business, starting out new is very risky.
The other thing is that although hotels traditionally have somewhat higher cap rates, but we are not in a normal market----practically all kinds of commercial real estate are valued at single digits, and even low single digits. So, you are buying at the top, not the bottom, of the market. At some point, the chasing yield just gets ridiculous and isn't a true measure of the risk you are taking. I recall Sean O'Toole's comments about the crazy deals people are making in this market, chasing yields into the low single digits, which is just crazy. When Bruce Norris appeared at the apartment association he asked whether the investors would buy apartments at the current valuations---and received universal laughter as if he had just said the craziest thing he could possibly say. Right now practically all investments----even bonds---seem like they are supercharged. The only thing worse than buying an overvalued residential property is buying an overvalued commercial property---which may, especially in a seller's market like this, permit you to lose value at the speed of light---and go where no man has gone before . . . Cap rates on all commercial properties (not just hotels) are at the lowest level they have been in 10 years---and it always seems like they are getting lower since the supply could never satisfy the insatiable demand. If you are asking this question on this board, my assumption is that the answer to your question should be a resounding No---very little in the current market is really safe. Certainly, no commercial properties bought today at today's prices are remotely "safe"----most owners of commercial properties would probably use another word: "insane".
Registered: 1451969813 Posts: 21
Reply with quote #7
Just thought that a stock ownership in a tertiary hospital might be a better option. Any thoughts?