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  • Property-a-holics

    Are hotel room purchases a good deal?

    Has anyone any experience of leasing a hotel room?  Deals seem to promise annual returns of 10%, no stamp duty and guaranteed 120% buy back after 5 years.  Seems too good to be true?

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    Hi Barbara,

    I would not touch with someone else's bargepole, let alone my own!

    Many of these schemes have failed or turned out to be complete scams.

    The big questions are:

    1.  Why can't the developer source finance through standard commercial channels when their is finance available for such projects?

    2.  How well is the hotel going to be marketed and managed to be able to achieve those returns for you?

    3.  If the company goes bust, what happens to your guarantees and your capital?

    4.  If you want to sell the room, is there are market for that?  (The answer to that is "no").

    Hope that assists with making your decision?

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    Hi Barbara,

    To second what Vanessa has said, I'd leave well alone.

    The hospitality sector is tricky to get right, even for seasoned entrepreneurs. You will have zero control over this type of investment and I too doubt the existence of an active secondary market. There are much safer ways of securing a 10% return, backed by UK property.

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    Just ask the cowboy flogging this snake oil - sorry, the consultant - for personal guarantees of all these "promises" from at least credit-checked and property-owning directors of these schemes/scams. NB You do the checks, don't rely on them doing them...

    £25 to an agreed housing charity if I ever see proof such guarantees are ever forthcoming.

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    I cannot see how the scheme you describe would not be a UCIS*, which would make it an criminal offence for someone to offer this to you, unless you were classified as a sophisticated investor. (*Moderator note:  UCIS = unregulated collective investment scheme*).

    Whilst you may well meet the minimum £150k income and/ or £250k of liquid investable assets, I would be surprised if a sophisticated investor would do their research on an open site like this.  

    If you are not certified as a sophisticated investor you actually have an obligation to report this scheme to the authorities.

    If you are certified as a sophisticated investor, then I suggest you get strong, independent  due diligence from accountants, barristers and FA's rather than going through this site. (Note: due diligence is not independent if you use any firm associated with the product sale, however loosely that may be).

    For more information on this I would suggest you look at the FCA website.

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    All of the above comments are correct,  but I'll simplify even further.

    You won't own the freehold,  so it's not a good deal,  same reason I don't buy flats.

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    Thanks to all who replied and you have confirmed my feelings about this.  I will stick to BTLs which I know and love!

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