Thinking of Buying a Condo Hotel? Here are the top things to consider

by

Dexter Valentine

The spectrum of condo hotel buyers is pretty broad. There are families that want a second home in a vacation destination. There are baby boomers who are at or nearing retirement and want somewhere they can \”winter.\” There are also plenty of investors who purchase a condo hotel unit with little intention of ever using it; they\’re in it for the potential appreciation of the real estate.

7. Can you live in a condo hotel?

Condo hotels are not typically offered as primary residences. In fact, many of them limit the unit owner\’s usage of the condo hotel unit (typically 30-60 days per year) because the unit is expected and needed in the hotel\’s nightly rental program where it can be offered to guests and generate revenue.

8. Who gets the money when your condo hotel is rented out?

The hotel management company splits the rental revenue with the individual condo hotel owner. While the exact percentages vary from property to property, the typical rental split is in the 50%-50% range.

9. Who finds hotel guests and then cleans and maintains the condo hotel units?

The hotel management company markets the property and books hotel guests. It also maintains the unit and ensures the smooth operation of all of the hotel\’s services and amenities.

10. What are the advantages / disadvantages of purchasing a condotel over purchasing typical rental properties?

Advantages include:

Hassle-free ownership; no landlord issues

Rental revenue to offset some or maybe all ownership expenses

A fantastic vacation home available for use whenever you want

A real estate investment at a time when other investments may seem less attractive

Strong likelihood of appreciation

Pride of ownership –\”I own a piece of a Trump\”

Disadvantages include:

Annual cash flow could be equal to or less than annual ownership costs

Pets are usually not welcome.

An owner\’s condo hotel unit may be rented when the owner wants to it, so advance reservations are required to guarantee availability.

The condo hotel unit is subject to the same dips in the market that affect all hotels in the competitive market set: hurricanes, terrorist threats, warm winters up north, price of gas, etc., all of which can affect a unit\’s occupancy rate and the amount of revenue it generates.

11. Are condo hotel units difficult to finance?

Not at all, but they do take 20% down typically, whereas condos can be purchased with less cash down. It\’s also important to make sure you use a mortgage broker who has had success in getting condo hotel financing deals done. Many banks still do not do them, but more and more are getting involved as condo hotels become more widely available.

12. How long have condo hotels been around and where are they located?

Condo hotels have been around for several decades, but the huge surge of four-star and five-star condo hotels that have been making their way across the country, started around year 2000 in the Miami area. The Miami-Fort Lauderdale area still has the most condo hotels, but areas like Orlando and Las Vegas are developing condo hotel properties at an even faster rate and will likely surpass South Florida soon. in the most luxurious properties.

15. Do you buy condo hotel units after they have been built, or can you purchase condo hotels in pre-construction?

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