I invest in hotels. Why? Because after many years focusing on residential property, I saw a market that was becoming so saturated that some sort of intervention was inevitable. There was simply no way a government, with its heart set on gaining popularity, could ignore the plight of young people frustrated at being pipped to the post by landlords more likely to win the favour of lenders.
A sort of pantomime has ensued, played out on the media stage, in which landlords have been depicted as property-grabbing villains, and first time buyers as fairytale figures in distress waiting to be rescued. It really doesn’t matter whose side you’re on. What matters is outcome. The government did a quick calculation, realised there were more distressed fairytale figures (aka potential voters) than villainous landlords, and decided to save the former and sacrifice the latter.
Now, with rental yields being squeezed by new tax measures and many landlords drifting into the red, the only silver lining left for many is capital gain. But as any seasoned property pro will tell you, relying on capital gain alone is risky, especially in a slightly faltering post-referendum market. And especially where property lacks the protections and benefits of being housed in a limited company. Relying on capital gains alone means betting the market will rise enough to cover every cost, large and small, of an end-to-end property transaction. In my opinion, at the tail end of a house price boom, that’s a high stakes gamble.
Although you might feel I say these things with the benefit of hindsight, little of what has happened since the 2015 budget is that surprising. It’s like any gold rush: gold is found, a few people trickle in, word gets out, more people come…you have a rush. Then the gold runs out, or so much of it is found and moved into the market that the supply and demand balance shifts, the yields drop off, and it no longer delivers the exciting returns it once did. This is the cyclical nature of markets. Property isn’t vastly different. But throw into the mix of natural cycles and volatility the government’s desire to win the support of a younger demographic (cue heavy meddling) and you have the backdrop against which the scene of landlord disenfranchisement is set.
Yes, the halcyon days of the buy-to-let boom are over for now. A good investor will have seen the writing on the wall and planned for it; a really good investor will have researched the company that built the wall the writing went on. Because knowing when to shift attention and capital from one part of the sector to another requires highly attuned senses and impeccable timing. If you don’t have these resources, it pays to talk to someone that does.
Fortunately, I have tried and tested every conceivable type of property investment. I’ve seen recessions come and go, property prices rise and fall, and one thing I’ve learnt—one unassailable truth if you will—is that if you get property right you can always win. Of course, it would be disingenuous if I were to lead you to believe that over the last 25 years I haven’t stuck my neck out on a few dud deals, or been stung once or twice. But these are the experiences that have made me a more perspicacious investor, and these are the experiences that have given me the rich insights I love to pass on. Or, to quote the American writer and satirist, Sam Levenson: Learn from other people’s mistakes. Life is too short to make them all yourself.
In short, through trial, error—and success—I have learned to envisage the wall before the wall gets built and the writing goes on it. It’s why I chose to put my own money into the hotel property business. It’s also why I feel confident in putting my co-investors’ money there. I know, and they know, that by putting their capital in working hotels with multiple streams of income they will get a reliable eight percent plus yield year-on-year with further gains on exit. Many, of course, choose not to exit. With their money reliably and provably working for them, why do such a thing? But knowing this is part of the financial plan provides security, and in a sector that, come budget time, has residential property investors chewing their nails to the quick, security of both income and outcome in property is a blessing indeed.
So, don’t do what many hundreds of thousands of people have done, and either put or leave your hard-earned capital in residential bricks and mortar. Get in touch with us at Shepherd Cox and discover better ways to secure solid returns on multiple revenue streams through hotel investments.
23 years / £120 million HMOs / 474 Houses / 17 Hotels