Avoid investment opportunities that lose money

Income and growth investments that crush cash, bonds, and annuities

Investment opportunities for income seekers are few and far between. Savings accounts pay next to nothing, and if you invest in government bonds, there’s a 30% chance that your investment will lose you money. For retirees, traditional annuities now pay an average of less than 3%.

Whatever the reasons that you need income, hotel room investment might just be the investment opportunity you’re looking for. They’re a set-and-forget deal, with guaranteed fixed income averaging around 8% per annum and, in many cases, guaranteed capital gains at the end of the fixed investment term.

Here, I’m going to look at these four income investment opportunities and tell you how you can take a step towards 8% income and 15% capital gain while you’re getting on with life.

Cash savings accounts – the guaranteed way to lose money

I saw a Facebook video the other day. George Cole (a great actor) advertising the Liquid Gold savings account back in the 1980s. Back then, you could get 10% on the cash you stashed in your building society. Those were the days, eh, when the world was your lobster!

You’d be lucky to find an account paying more than 1% today. If you want to lock your money up for five years, Nationwide offers 5%. But that’s only for the first year. Oh, and only on the first £2,500. After this, you’ll receive 1%. Put £100,000 away for five years, and you’ll receive a total of around £5,250.

Your investment, including income, will be worth about £105,250 after five years. Inflation is currently running at 1.6% and is expected to rise as high as 5% later this year. If the average inflation rate remains at 1.6% during the next five years, your £100,000 investment today would need to grow to £108,260 just to be worth what it is today.

Forget the idea that investing in cash is safe – you just lost £3,010 of value in five years.

Governments are desperate for cash – reasons not to give it to them

If you’re like me, you’ll be keen to pay as little tax as possible, and pay what the right amount that's due. So, your financial advisor spends a heap of time on recommending tax-avoiding investments. Then he advises you to give your cash to the government by buying income-producing government bonds, treasuries, and gilts. “Diversify,” he’ll tell you. “Invest in a bond fund that invests in government bonds around the world.”

Oh dear!

Perhaps your financial advisor hasn’t noticed, but a third of all government bonds now have a negative yield. What does this mean? When you invest in a bond with a negative yield, you are effectively paying a government to look after your money. With a negative yield of just 1%, a £100,000 investment today would be worth around £95,100 in five years. Oh, and in the meantime, you haven’t had any income from your investment.

Get this, too the way that bonds work if interest rates rise bond prices will fall. What they give you in one hand, they’ll take away from the other.

Get ready for a poorer retirement with annuities

You’ve worked all your life and saved hard for retirement. The traditional way of creating income is to convert your pension pot into an annuity. Ten years ago, £100,000 would have got you around 7% per year. Today, the average is under 3%.

Let’s say you buy an annuity with £100,000. You’ll get £3,000 per year. After five years, you’ll have received £15,000 of income. But here’s the thing with annuities: once you’ve bought it, you can’t change your mind. When you die, the investment is gone. While you’re still living, you can’t switch your investment to a better investment opportunity.

Hotel room investment – the new liquid gold

Forget government bonds; hotel rooms are today’s gilt-edged investments. A hotel room is a tangible asset – you can visit it, and even stay in it if you like.

Hotel management companies sell their rooms to generate fast cash for business expansion – expansion that creates higher revenues and profits. And right now, the future for hotels looks very bright. Brexit may have damaged the value of the pound, but the hotel industry is a big beneficiary – research group Law360 expects more ‘staycations’ and more foreign tourists to bump up hotel room occupancy rates even further after several years of growth.

Here’s how hotel room investment works:

  • You buy a hotel room
  • The investment is for a fixed period (usually five years)
  • You receive a fixed income
  • At the end of the term, you receive your invested capital with the guaranteed growth offered

Hotel room investment is an investment which is like investing in a combination of property, fixed income, and a growth business: part of what makes investing in hotel rooms so appealing.

Imagine receiving 8% income per year and guaranteed capital growth of 15%.

After five years, you will have received £40,000 of income and £15,000 of capital growth. Your investment would be worth £115,000, and you’ll have benefited from £8,000 of income every year during the investment period.

£155,000 total return. Compare that to cash savings, government bonds, and annuities. Well, you could, but I really wouldn't bother.

How do you find the best hotel room investment opportunities?

Every day your money is locked away in a cash account, it’s losing money. You’ll lose even more money by saving it with the government (did you expect anything more?). And for your retirement – well, annuities only make financial advisors any real money.

If you want to boost your income, perhaps to pay for school fees or invest towards retirement, contact our team today on +44 (0)207 923 6100 and ask about hotel room investment. You could be a phone call away from inflation-busting income and capital growth.

Live with Passion

Brett Alegre-Wood