The trend of apart-hotels is growing dynamically worldwide, attracting the attention of investors who, due to turbulence in the real estate market, cash flow problems, and increased credit rates, are forced to look for innovative development paths.
Apart-hotels are hybrid properties that combine the quality of hotel services with the space and amenities of apartments, offering a compelling combination of income potential and adaptability. However, for any experienced investor, understanding potential exit strategies is as crucial as identifying initial investments.
Exit options for Apart-Hotel investors
When considering exit strategies, DwellBell offers investors three flexible options:
1. Hold an entire unit
The developer retains ownership of the entire Apart-Hotel building (or a significant portion of it) as an investment property.
The advantage of this strategy is regular rental income. Apart-Hotels generate a steady cash flow through short-term and long-term rentals of individual units. Real estate value also increases over time, especially rapidly in attractive locations.
2. Sell an entire unit
The developer sells the entire Apart-Hotel property to a single investor or institutional buyer. This strategy offers a relatively quick way to liquidate investments and increase capital, freeing it up for other projects.
Selling a whole unit to a single buyer typically involves less complex negotiation and paperwork compared to selling individual units to multiple buyers.
3. Sell separate apartments within the property
The developer divides the Apart-Hotel into separate apartments for sale to multiple buyers.
The strategy of selling individual units provides potentially maximum profit if the market supports individual sales and the developer can competitively price the units. Another advantage is flexibility, as it can satisfy a diverse pool of buyers, including investors, owners, or those looking for short-term rental properties.
Selling individual units can also provide resilience in changing markets, as the sales pace can be adjusted accordingly.
Key factors affecting the resale value of an Apart-Hotel:
Location is paramount. Apart-hotels located in thriving urban centres, near business districts, or desirable leisure destinations have higher resale values due to their proximity to transportation hubs, amenities, and attractions.
Occupancy and financial performance are also important considerations.
Consistent high occupancy rates and stable revenue streams are clear indicators of an apart-hotel’s desirability. Investors will closely examine financial statements and historical data.
Well-maintained properties with updated amenities will attract greater buyer interest. Deferred maintenance or the need for significant renovations can negatively impact resale value.
It is important to consider market trends. The hospitality sector’s overall health and the market’s specific dynamics can influence the resale prices of apart-hotels. Understanding prevailing economic conditions and emerging trends is crucial to determining the ideal time to sell.
Timing your exit
Choosing the right time to sell is critical to maximising returns. Investors should monitor global economic trends, regional market dynamics, and individual property performance indicators. Consulting with experienced real estate brokers specialising in the hospitality sector is recommended to avoid the negative consequences of selling in the wrong period of time.
In conclusion,
Apart-hotels present appealing opportunities for investors seeking innovative solutions that combine stability and growth potential. Investors can make informed decisions by comprehending the available exit strategies and the factors that influence resale value. A thorough analysis of the emerging apart-hotel market, combined with a solid exit strategy, is crucial for ensuring long-term success in this dynamic sector of the hospitality industry.
