For 1031 buyers seeking to defer capital gains and secure higher returns, hotel assets present a compelling opportunity for investment. In today’s market, traditional options like drugstores or QSR (Quick Service Restaurants) typically offer cap rates in the 5-6% range. However, many savvy investors are finding that hotels structured as NNN (triple net) sale-leasebacks can provide cap rates in the more attractive 7-8% range, delivering higher yields without the management burdens.
Here’s why 1031 buyers should consider hotel assets for their next exchange:
1. Higher Cap Rates and Predictable Cash Flow
With cap rates averaging 7-8%, hotels in a sale-leaseback structure offer better returns compared to other NNN assets like drugstores. This “coupon” or passive income stream provides a reliable and higher yield, ideal for investors seeking predictable returns.
2. True Passive Investment – No Business Ownership or Management Hassle
Many 1031 buyers prefer hands-off investments. In a hotel sale-leaseback, the investor owns the real estate, while the operator manages the day-to-day business operations and cash flow. The tenant is responsible for taxes, insurance, and maintenance, leaving the buyer with mailbox money and peace of mind.
3. Long-Term Stability
Many hotel operators in sale-leaseback arrangements come with corporate-backed leases and/or lease reserves, reducing the risk for buyers. Long-term leases (often 15-20 years) with reputable tenants ensure that investors can count on steady cash flow without the need to manage the property or business operations.
4. Flexible Deal Sizes
Hotel sale-leaseback transactions can range from $5 million to $30 million or more, offering 1031 buyers flexibility depending on their exchange needs. Whether you’re looking to roll over smaller amounts or complete larger transactions, hotel assets can accommodate a wide range of investment sizes.
5. One-Stop Solution for High-Value Exchanges
For buyers needing to identify down legs in higher-value exchanges, hotel assets provide a streamlined solution. By investing in a single hotel property rather than multiple smaller assets, 1031 investors can simplify their transactions while achieving higher returns and passive income.
Conclusion:
For 1031 investors seeking to maximize their exchange, secure higher cap rates, and enjoy true passive income, hotel assets in a sale-leaseback arrangement offer an attractive alternative. With corporate-backed leases, long-term stability, and attractive cap rates, hotels provide a unique opportunity to enhance your portfolio and secure your financial future.
For 1031 investors seeking to maximize their exchange, secure higher cap rates, and enjoy true passive income, hotel assets in a sale-leaseback arrangement offer an attractive alternative. With corporate-backed leases, long-term stability, and attractive cap rates, hotels provide a unique opportunity to enhance your portfolio and secure your financial future. Contact ZEL Capital Partners at [email protected] to learn more.
