Accountable Equity

STRATEGIC CHECKLIST FOR INVESTING IN HOTEL & RESORT REAL ESTATE

Get our step-by-step checklist for Passive Investing in Hospitality Real Estate Assets!

Introduction

Hotel and resort real estate can be a great investment for accredited investors. It can offer the potential for steady passive income, perpetual ownership, as well as long-term capital appreciation. However, it is important to do your research and invest with a reputable fund sponsor.

This checklist is designed to help you through the process of passive investing in hotel and resort real estate. It covers everything from setting your investment goals to finding a reputable fund sponsor and asking the right questions.

Step-by-Step Checklist for Passive Investing in Hotel and Resort Real Estate for Accredited Investors

STEP 1 Set your investment goals

What are you hoping to achieve with your investment? Are you looking for a steady stream of passive income, or are you hoping to build equity over time? Once you know your goals, you can start to narrow down your investment options.

STEP 2 Research the hotel and resort real estate market

Understand the current state of the market, as well as the long-term trends. Pay attention to factors such as occupancy rates, average daily rates, and revenue per available room. You should also research specific markets and submarkets to identify areas where there is strong demand for hotel and resort accommodations.

STEP 3 Differentiators and Value-Add

What differentiates one hospitality resort from another? Is the resort simply a building with rooms and free breakfast that services the business traveler or is it a more sophisticated integrated resort that has multi-layered offerings? Is it a “drive to destination” which brings an entirely different type of guest and experience? Is there a “Value-Add” play that could add major growth to the business model like future land development?

STEP 4 Contracted Revenue

How does a hospitality resort have contracted revenue? Weddings and Events! A resort that has one or more event ballrooms/venues will completely change how the resort operates and has predictable contracted revenue booked 24 months+ into the future! The venues are used for weddings on the weekends and corporate events during the week. Both filling up the occupancy of the rooms and driving up the average daily rate.

STEP 5 Find a reputable fund sponsor

A fund sponsor is a company that raises money from investors to acquire and manage hotel and resort properties. When choosing a fund sponsor, look for a company with a proven track record and a team of experienced professionals. Here are some questions to ask potential fund sponsors:

• How long have you been in business?

• How many hotel and resort properties do you currently manage?

• What is your investment strategy?

• What is your track record?

• What are the fees associated with the fund?

• What are the risks associated with the investment?

• How will you distribute cash flows to investors?

You should also check the fund sponsor's background with the Securities and Exchange Commission (SEC). You can do this by visiting the SEC's website and searching for the fund sponsor's name.

STEP 6 Review the fund prospectus

The fund prospectus is a legal document that describes the investment in detail. It will include information about the fund's investment strategy, fees, and risks. Be sure to read the prospectus carefully before making an investment decision.

Here are some key things to look for in the fund prospectus:

• Investment strategy: What types of hotel and resort properties will the fund invest in? How will the fund manager select and acquire properties?

• Fees: What are the management fees, performance fees, and other fees associated with the fund?

• Risks: What are the risks associated with investing in hotel and resort real estate? How will the fund manager mitigate these risks?

STEP 7 Ask the fund sponsor questions

Once you have reviewed the fund prospectus, you should schedule a call with the fund sponsor to ask any additional questions you have. Here are some good questions to ask:

• What is your experience in managing hotel and resort properties?

• What is your investment philosophy?

• How do you identify and evaluate potential investment opportunities?

• How do you manage risk?

• What are your plans for the fund's future?

In addition to these general questions, you should also ask specific questions about the fund's investment strategy and the properties that the fund is considering acquiring. For example, you could ask the following questions:

• What types of hotel and resort properties are you looking to invest in?

• What geographic markets are you targeting?

• What are your criteria for selecting properties?

• How do you underwrite potential investments?

• What is your exit strategy?

STEP 8 Make an investment decision

Once you have asked all of your questions and are satisfied with the fund sponsor's answers, you can make an investment decision. Be sure to invest within your risk tolerance and only invest money that you can afford to lose.

12 Essential Steps for Passive Investing in Hospitality

Hospitality Strategy and Objectives

Track Record and Experience

Hospitality Investment Portfolio

Risk Management and Mitigation

Fund Structure and Terms

Reporting and Communications

Deal Sourcing and Underwriting

Capital Structure and Leverage

Value-Add Strategy

Investment Performance and Reporting

Exit Strategy and Liquidity

Alignment of Interests

Additional Tips for Passive Investing in Hotel and Resort Real Estate

• Be patient. It takes time to build wealth through passive investing.

• Invest with a diversified portfolio of funds. This will help to reduce your risk.

• Reinvest your earnings to grow your wealth over time.

• Work with a trusted financial advisor to develop an investment plan that is right for you.

• Don't put all your eggs in one basket. Diversify your portfolio by investing in a variety of different funds.

• Monitor your investments regularly and make adjustments as needed.

Conclusion

Investing in hotel and resort real estate can present a challenging and intricate process, but it can also yield significant rewards. It is essential to follow a comprehensive checklist to maximize your chances of success. This includes conducting thorough market research to identify potential locations with high occupancy rates and robust demand. You should also evaluate the financial performance of the properties you are considering, taking into account factors such as revenue, expenses, and cash flow.

It is also crucial to examine the quality and condition of the physical assets, including the building's structure, amenities, and furnishings. Additionally, you must ensure that you comply with all relevant regulations and obtain the necessary permits and licenses. By following these steps, you can achieve success in your hotel and resort real estate investments and enjoy a steady stream of income for years to come.

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Disclaimer

This checklist is for informational purposes only and does not constitute financial advice. You should always consult with a qualified financial advisor before making any investment decisions.

The information in this checklist is based on our experience, and we have made every effort to ensure that it is accurate and up-to-date. However, we cannot guarantee the accuracy or completeness of the information.

Any investments you make based on the information in this checklist are at your own risk. We are not liable for any losses or damages that you may incur as a result of following the advice in this checklist.

Please use this checklist as a starting point for your own research, and do not rely on it solely as the basis for your investment decisions.

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