Thinking of Buying a Condo Hotel? Here are 20 things you need to know!
1. What is a condo hotel or condotel?
Think of a condo hotel (sometimes also called a condotel or condo hotel) like buying a condo, even if it’s part of a four-star-caliber hotel. So, as an owner, when you’re on vacation, you’ll get the benefit of more four-star services and amenities than you would in a typical condo.
2. What types of services and amenities are found in condo hotels?
If you can imagine the niceties you would find in a luxury hotel, then you can imagine an apartment hotel. Features often include resort-style pools, full-service spas, state-of-the-art fitness centers, fine-dining restaurants, concierge services, and room service.
In some places, like Las Vegas, you’ll find condominiums with their own casinos, shopping areas, and entertainment venues. In places like Orlando, you’ll find condos with their own water parks and convention facilities.
3. What is the difference between a hotel condo and a traditional condominium?
The big difference between a hotel and a condo hotel is that a hotel usually has an owner, either individual or corporate, but a condo hotel is sold unit by unit. Thus, a 300-room condo hotel could have up to 300 unit owners.
4. Is it obvious to hotel guests if they are staying in a condo hotel or a traditional hotel?
A hotel guest will likely never know that the hotel has multiple owners because the property is operated like a traditional hotel and is often under the management of a well-known hotel company such as Hilton, Hyatt, Starwood, Trump, or W. Additionally, each of the condo hotel’s individual units will look identical in design and décor, just as they would in a traditional hotel.
5. Who usually buys condos?
They are primarily sold to people who want a vacation home but don’t want to deal with the hassles typically associated with second home ownership, such as property maintenance or finding tenants in the off-season.
6. What is the demographic of the typical condo hotel buyer?
The spectrum of hotel condominium buyers is quite broad. There are families who want a second home in a vacation destination. There are baby boomers who are retired or close to retirement and want a place where they can spend the winter. There are also many investors who buy a condo hotel unit with little intention of ever using it; they are in it for the potential appreciation of real estate.
7. Can you live in a condo hotel?
Condominiums are generally not offered as a primary residence. In fact, many of them limit the unit owner’s use of the condominium hotel unit (generally 30 to 60 days per year) because the unit is expected and needed in the hotel’s nightly rental program where can be offered to guests and generate income.
8. Who receives the money when your condo hotel is rented?
The hotel management company splits the rental income with the individual owner of the hotel condominium. While the exact percentages vary from property to property, the typical rent split is in the 50-50% range.
9. Who meets the hotel guests and then cleans and maintains the condo hotel units?
The hotel management company markets the property and books it to hotel guests. He also maintains the unit and ensures the smooth running of all hotel services and amenities.
10. What are the advantages/disadvantages of buying a condo over buying typical rental properties?
Benefits included:
· Property without problems; no owner issues
Rental income to offset some or perhaps all property expenses
A fantastic holiday home available to use whenever you want
A real estate investment at a time when other investments may seem less attractive
High probability of appreciation
Pride of Ownership: “I own a piece of Trump”
The disadvantages include:
Annual cash flow could be equal to or less than annual cost of ownership
· Pets are generally not welcome.
An owner’s condominium hotel unit can be rented whenever the owner wishes, so advance reservations are required to ensure availability.
The condo hotel unit is subject to the same market downturns that affect all hotels in the competitive market: hurricanes, terrorist threats, warm northern winters, gas prices, etc., all of which can affect the rate. occupancy of a unit and the amount of income it generates.
11. Are condo hotel units difficult to finance?
Not at all, but they usually take a 20% down payment, whereas condos can be purchased with less down payment. It’s also important to make sure you use a mortgage broker who has been successful in putting together hotel condominium financing deals. Many banks still don’t do them, but more and more are getting involved as condo hotels become more widely available.
12. How long have the condominiums been around and where are they located?
Condominium hotels have been around for several decades, but the great wave of four- and five-star condominium hotels that have made their way across the country began around the 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 are likely to surpass South Florida soon. Other promising areas are places like the Bahamas, Panama, the Dominican Republic, Mexico, Canada, and Dubai.
13. How much do hotel condo units cost?
That’s like asking how much a car costs. There are condos of different qualities. Some require larger amounts of money than others, obviously.
There are cheap condominium hotels for as little as $100,000. They are typically found in properties that have converted their use from an existing hotel. They are the size of a hotel room, lacking kitchen facilities, luxury franchises, and other high-class amenities.
Then there are the four-star or higher properties that can start in the $300,000 to $400,000 range, but can go as high as $800,000 just for a studio unit. One- and two-bedroom units cost substantially more than a studio. Of course, the studios come fully furnished and finished, and will be significantly larger than a typical hotel room, and may attract guests due to their name like the St. Regis, Ritz, or W.
14. What are typical maintenance costs?
On average about $1.00 to $1.50 per square meter. ft., but the range can exceed $2.00 per square foot. foot in the most luxurious properties.
15. Do you buy condo hotel units after they are built, or can you buy condo hotels pre-construction?
Unless you’re in a hurry to start your vacation or need to complete a 1031 exchange, it’s best to buy pre-construction condos as soon as possible. That’s when prices are lowest and unit selection is greatest. You’ll likely wait two years or more before closing on and repossessing your condo hotel unit, but you’ll have locked in the price and reaped the benefit of maximum appreciation.
16. Is there anything else investors should know about condotels?
There is more to buying this type of real estate than the old phrase, “location, location, location.” While most condo hotels are located in attractive resorts and business areas, the most important thing is a good franchise with a strong reservation system.
Also, don’t be fooled by an aggressive rental division. One way or another, the property developer will have to staff, maintain, and operate the hotel and its amenities, such as restaurants, bars, spas, and pools, from their share of the revenue. If you are giving her a very favorable portion of the rent, you are also more likely to be charging a higher monthly maintenance fee. Of course, this goes both ways. If the upkeep split being offered is closer to 50-50, then your upkeep should be more reasonable as well.
17. Any suggestions for investors when choosing which condo hotel to buy?
Get good advice. That means you don’t want to rely solely on the presentation provided by an on-site salesperson at a condo hotel. You want to speak with a broker who specializes in condo hotels and who knows and understands the entire condo hotel market, not just the facts surrounding a single property. He or she will listen to your wishes and needs and then offer recommendations on which properties best suit your requirements. You will have the opportunity to compare shops and consider the pros and cons of each available property.
A good broker can be the difference between buying a condo hotel that will be troublesome and not live up to your expectations or one that will give you years of great vacations, a good annual income, and a substantial profit when it sells.
18. Does it cost more to use a real estate broker to buy a hotel condo than to buy a unit on your own?
No. With new condo hotel properties, prices are always set by the developer and are exactly the same whether you buy directly from an on-site seller or through a broker.
The broker’s commission is always paid by the developer and is already included in the price, regardless of whether a third-party broker is involved in the sale or not. Since a broker’s representation is free to buyers, it makes sense to seek their help and get the benefit of their advice before making a purchase.
19. How can prospective buyers find a good condo hotel broker?
Ask your friends for broker recommendations or search online for “hotel condominium agent.” Visit condo hotel broker websites and see if the information they provide seems complete and unbiased. If your website seems to focus on selling homes or office space, and the condo hotel information seems like an afterthought, walk away. Your best bet is to work with a condo hotel broker who specializes.
20. How can buyers find out about new hotel condominium properties coming on the market?
Condo hotel brokers can be good sources of information, as they often learn about properties prior to their release to the general public. Another option is to subscribe to a condo hotel newsletter like the one we publish called Condo Hotel Property Alert. We offer it for free on our website http://www.CondoHotelCenter.com and it features a different condo hotel property coming to market each issue.