Best Cities To Buy For Multi Unit Cash Flow Thinking of Buying a Condo Hotel? Here Are 20 Things You Need to Know!

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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 called a condotel or hotel condo) as buying a condominium, albeit one that is part of a four-star caliber hotel. So, as an owner, when you’re on vacation, you’ll have the benefit of more four-star services and amenities than a typical condominium.

2. What kind of services and facilities are available in condo hotels?

If you can imagine the nice things you would find in an upscale hotel, then you can picture a condo hotel. Features include numerous 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 hotels with their own casinos, retail areas, and entertainment venues. In places like Orlando, you’ll find condo hotels with their own water parks and convention facilities.

3. What is the difference between a condo hotel and a traditional condominium?

The main difference between a hotel and a condo hotel is that a hotel usually has one owner, either individual or corporate, but a condo hotel is sold by unit. So, a 300-room condo hotel would have 300 unit owners.

4. Is it obvious to hotel guests whether they are staying at a condo hotel or a traditional hotel?

A hotel guest may never know that a hotel has multiple owners because the property is run just like a traditional hotel and is often managed by a well-known hotel company such as Hilton, Hyatt, Starwood, Trump or W. Individual condo hotel units will look the same in design and decor as they would in a traditional hotel.

5. Who typically buys condo hotels?

They are primarily marketed to people who want a vacation home but don’t want to deal with the issues typically associated with second home ownership such as maintaining the property or finding rentals in the off-season.

6. What are the demographics of the typical condo hotel buyer?

The spectrum of condo hotel buyers is very broad. There are families who want a second home in a vacation destination. There are baby boomers who are at or near retirement and wish they could “winter” somewhere. There are also plenty of investors who buy a condo hotel unit with little intention of using it; They are in it for the potential value of the real estate.

7. Can you stay in a condo hotel?

Condo hotels are not usually offered as a primary residence. In fact, many of these units limit the owner’s use of the condo hotel unit (typically 30-60 days per year) because the unit is expected and required in the hotel’s nightly rental program where It can be offered to guests and generate income.

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

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

9. Who checks in 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 smooth operation of all hotel services and facilities.

10. What are the advantages/disadvantages of buying a condo over buying a typical rental property?

Benefits include:

· Encumbrance-free property; The landlord is not the problem

· Rental income to cover some or perhaps all of the property’s costs

· A wonderful vacation home available for use whenever you want

· Investing in real estate at a time when other investments may seem less attractive

· Strong potential for value

· Pride of ownership – “I have a piece of Trump”

Disadvantages include:

· Annual cash flow may be equal to or less than annual property costs

· Pets are generally not welcome.

· Owner’s condo hotel units can be rented when the owner wants it, so advance reservations are required to guarantee availability.

· The condo hotel unit market is subject to the same shocks that affect all hotels in a competitive market set: hurricanes, terrorist threats, warm northern winters, gas prices, etc., all of which affect a unit’s occupancy rate. can affect And the amount of income it generates.

11. Are condo hotel units difficult to finance?

Not at all, but they usually take 20 percent down, while condos can be purchased with less cash. It’s also important to make sure you use a mortgage broker who has had success getting condo hotel financing deals. Many banks still don’t do them, but more and more are joining in 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 decades, but the surge of four-star and five-star condo hotels that are making their way across the country began in the Miami area in the year 2000. The Miami-Fort Lauderdale area still has the most condo hotels, but condo hotel properties in areas like Orlando and Las Vegas are still growing at a rapid pace and will soon overtake South Florida. Other up and coming destinations are places like Bahamas, Panama, Dominican Republic, Mexico, Canada and Dubai.

13. How much do condo hotel units cost?

It’s like asking how much a car costs. There are hotels of different quality. Some require larger amounts of money than others, obviously.

There are cheap condo hotels out there for as little as $100,000. They are usually found in properties that have changed their use from an existing hotel. These are hotel rooms, no kitchen facilities, luxury franchises, and other first-class amenities.

Then there are the four-star or larger properties that can start in the $300,000 to $400,000 range, but can go up to $800,000 for just a studio unit. One- and two-bedroom units cost much more than a studio. Of course, studios are fully furnished and equipped, and may be much larger in size than a typical hotel room, and may attract guests because of its name of St. Regis, Ritz, or W.

14. What are the general maintenance costs?

Average is about $1.00 to $1.50 per square foot, but can be as high as $2.00 per square foot.

15. Can you buy condo-hotel units after construction, or can you buy condo-hotels before construction?

Unless you’re in a hurry to start a vacation or you need to complete a 1031 exchange, it’s best to buy a pre-construction condo hotel as soon as possible. This is when prices are low and the selection of units is very large. You may have to wait two years or more before closing and taking possession of your condo hotel unit, but you will have locked in value and reaped the benefits of maximum appreciation.

16. Is there anything else investors should know about condotels?

Buying this type of real estate is more than the old phrase, “Location, location, location.” While most condo hotels are located in desirable resort and business district locations, what is most important is a good franchise with a solid reservation system.

Also, don’t be fooled by an aggressive rental distribution. One way or another, the property developer has to operate, maintain and operate the hotel and its services such as restaurants, bars, spas and pools. If he is giving you a very favorable portion of the rent, he is more likely to charge you a higher monthly maintenance fee. Of course, it goes both ways. If the maintenance split that is offered is closer to 50-50, then your maintenance should also be more reasonable.

17. Any tips for investors in choosing which condo to buy?

Get good advice. This means you don’t want to just settle for a condo hotel pitch provided by an onsite salesperson. 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 related to a single property. He will listen to your wants and needs and then make recommendations on which properties meet your needs. You will have an opportunity to comparison shop and consider the pros and cons of each available property.

A good broker can be the difference between you buying a condo that will be difficult and not live up to your expectations or one that will provide you with great vacations, good annual income and a substantial profit when you sell. .

18. Does it cost more to use a real estate broker to purchase a condo hotel than to purchase a single unit?

No. With new condo hotel properties, prices are always set by the developer and are the same whether you buy directly from an onsite salesperson at the property or use a broker.

The broker’s commission is always paid by the developer and is already built into the price regardless of whether an outside broker participates in the sale or not. Since a broker’s representation is free to buyers, it makes sense to enlist their help and take advantage of their advice before making a purchase.

19. How can potential buyers find a good condo hotel broker?

Ask friends for broker recommendations or search online for “condo hotel broker.” Visit condo hotel broker websites and see if the information they provide seems comprehensive and unbiased. If their website seems to focus on selling homes or office space, and the condo hotel information appears as an afterthought, steer clear. Your best bet is to work with a condo hotel broker who is an expert.

20. How can buyers learn about new condo hotel properties coming on the market?

Condo hotel brokers can be good sources of information as they know about properties before they are released to the general public. Another option is for them to subscribe to condo hotel newsletters such as the one we publish as Condo Hotel Property Alert. We offer it for free on our website and each edition features a different condo hotel property to hit the market.

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