Get a pied-à-terre in London and an investment too

Helen Brown checks out a hotel scheme that offers you the best of both worlds

When you were a teenager, did your parents ever accuse you of treating their home like a hotel? Did the idea of a curfew-free home with room service rather appeal to you? And, now you're all grown up, do you have a spare £240,000 kicking about, waiting for that perfect investment opportunity? If so then "GuestInvest" may be the scheme for you.

The basic idea is that you buy a room in a swish, London hotel. It's available for your use 52 days per year. The remaining 313 days it's rented out and you get 50 per cent of the income it generates. Plus, you get the security of knowing your money is in bricks and mortar that's being well maintained because it's hardly in the hotel's interests to let the place fall apart.

GuestInvest, the brainchild of Johnny Sandelson, was launched in April 2004. Just two years later, he has announced the £55m redevelopment of its third hotel on one of London's oldest City Grade II listed sites, the former Whitbread Brewery.

Sandelson explains how he got started. "I'd been in commercial property in London for 15 years, buying flats, developing them, buying pieces of land, getting planning consent. And I found myself getting bored and frustrated, because there's not much left behind to show for it at the end except the dusty pile of your tax bills. That's when I came up with the idea: wouldn't it be good to buy a hotel room? Plus, the time felt right. Investors were very keen to put their money into the property market, driven by the bad performance of the stock market and bad management of pension funds. Plus, the innate understanding that, post-war, property investment has massively outperformed anything else. The hotel works as perfect units of leasehold. Its hassle-free, you get an income at the end of each quarter, you get the capital. It's a commercial buy-to-let and a pied-à-terre designed to appeal to the corporate traveller. GuestInvest rooms also qualify for SIPPs, classed as commercial property - although if you buy a room as part of a pension you can't use it."

Guesthouse West, a boutique hotel in Notting Hill, was GuestInvest's first venture. The investors seem happy so far. They've seen 6.8 per cent returns in the first two years of ownership, with those who have since sold their rooms netting an average capital growth of 15 per cent. Christian Arnot, 27, the managing director of his own translation company, is very happy with his 999 year lease on room No 5. "I've used it mainly for putting up visiting clients and colleagues for nothing. It's quite cool. And I'll probably use it more in the future as I intend to move out of London at some point. That's the lifestyle perk. But I'm in it mainly for the capital investment - over the past two years my room has increased in value by 14.8 per cent, £35,000."

GuestInvest's second project was Nest, in Bayswater, due to open in October 2007, where half of the 160 rooms have been sold off plan from £275,000. The new hotel, to be named The Chiswell Street Hotel, will add 200 rooms to GuestInvest's property portfolio, bringing its total to almost 400 rooms across its three hotels. Clean-line architects Cowie Dalgleish Montgomery will be tailoring rooms for the corporate client. The drawings of the rooms (whose prices start at £240,000) reveal a classic modernist look - dark wood wall paneling, taupe carpets and a designer sofa. But, from the outside, the building will retain the old-school grandeur of the brewery purchased by Samuel Whitbread in 1748 for the production of porter, and visited by George III in 1787.

Sandelson says that the hotel industry is booming. "In the year to July 2006, London hotels have experienced a rise in revenue and occupancy rates. Revenue per available room rose 30 per cent, the average cost of a London hotel room increased almost 20 per cent, and occupancy rates climbed to 88.6 per cent from 77.8 per cent a year earlier."

Of course, the aspect that will concern many property investors is the lack of control. Investors will have only as much say in the running of the hotel as a "regular, well-respected guest". And there is a worry that when the hotel needs major refurbishment in, say, 10 years' time, the bills footed by investors may be high. But Arnot isn't too worried. "I pay around £500 a year as a major services contribution. That's more than covered by the annual 6.53 per cent investment return." And, of course, he gets to treat the place like a hotel.