The benefits of investing in this low-risk, high-return asset class
Traveling may not be top of mind during a pandemic, but hotel properties are still a favorite among savvy real estate investors. In fact, hotel real estate syndication has been gaining attention in recent years.
Many of these deals are hidden gems that are yet to be discovered. Investors who recognize the many benefits of investing in this asset class are well-positioned to take advantage of the opportunities.
If you’re considering adding hotel real estate to your investment portfolio, here’s what you need to know.
Why Hotel Real Estate Syndication is a Hidden Gem For Savvy Investors
Many knowledgeable investors consider hotel real estate syndication a smart investment thanks to the combination of stable income and low value volatility. Also, improved property fundamentals and elevated pricing have been reaping gains for investors while new tax laws allow hotel investors to realize depreciation in an even more efficient manner.
The risks of investing in hotel real estate are often considered lower than many options in today’s volatile market. Furthermore, you can tap into the benefits of diversification, tourism recovery, and passive investment
Diversification and Returns
Diversifying your investment can help minimize the risk of loss to the overall value of the portfolio, increase exposure to more opportunities for return, safeguard against adverse market cycles, and reduce the volatility of your portfolio.
Hotel real estate syndication deals allow you to reap the benefits of diversification, particularly because their returns historically demonstrate a low correlation to the values of stocks, bonds, and other real estate investments.
Also, the hotel industry has a track record of performing well in times of high volatility and offers predictable cash flows. Hotel real estate syndication combines the stable income of real estate investment with equity growth over time.
Syndication also allows you to spread out your capital over multiple deals to further diversify your investments and increase your exposure to high-return opportunities with better downside protection and lower volatility.
While tourism took a substantial hit in 2020, the industry is projected to experience a recovery in the near future. For instance, industry professionals express cautious optimism that by the end of 2021, tourism in many popular destinations will experience a gradual but eventual full recovery.
Tourism isn’t going away, and many regions are already seeing strong indications of pent-up demand and growth in the redemption of previously cancelled bookings — especially now that COVID vaccines are becoming available and countries that have the virus under control are reopening.
For instance, a recent scenario modelled by the UN’s World Tourism Organization (UNWTO) suggests that Caribbean tourism, thanks to the region’s proximity to North America and its appeal of outdoor activities, can expect a steady return around mid-2021.
Many countries that depend on tourism are taking the lessons learned during the pandemic to heart and using this opportunity to refine their tourism offerings to attract more consumers in the coming years.
These regions are also taking steps to minimize their vulnerability to economic downturns, develop responses to political and public health crises, address revenue leakage and competition, improve public-private partnerships, and attract foreign investments. All of these will help increase the resiliency of their economies and create a more investor-friendly environment.
Passive Income and Tangible Assets
Hotel real estate syndication investments are both tangible and passive. You can visit the hotel and evaluate the physical property to assess its revenue-generating potential.
When you partner with a reputable hotel real estate syndication sponsor as a passive investor, they will perform the due diligence, provide the market knowledge, and oversee the day-to-day management of the property. You can reap the gains without spending the time or resources to manage the investment. Working with an experienced sponsor can also minimize the risk associated with a deal and increase the odds of achieving high returns.
Also, a hotel syndication deal allows investors to achieve economies of scale in their contracts for property management, renovation expenses, cleaning services, etc. This can improve the profitability and return on investment compared to smaller investments.
Key to Hotel Real Estate Syndication Success: Partnering With the Right Sponsor
To maximize the benefits of hotel real estate syndication deals, partner with a reputable sponsor (also sometimes called the syndicator, asset manager, general partner, GP, or operator) who has extensive experience in the hotel real estate business.
Your sponsor should identify properties in regions with multiple demand drivers and choose the right hotel brand for each location based on the market. They should have a premium portfolio of properties for you to choose from, an established development capacity, and the expertise to engage in extensive due diligence for evaluating acquisitions and the income-generating potential of each property.
Besides extensive knowledge of the local real estate market, your sponsor should address broader international investment trends to identify the best opportunities in the global market. They should also structure the deal and line up the right asset management team to optimize the returns, including financial incentives that directly benefit the investor.
Why not speak to one of our real estate specialists about purchasing property ?
We are a boutique investment firm with years of experience delivering bespoke residence and citizenship-by-investment solutions for international families. At Prime Land Ventures, we can simplify access to property investments, provide local insights, help with legal assistance, tax planning, and more—all while ensuring efficient, personalized, and confidential service