Explain the Condo-Hotel Concept
Condo-hotel units are sold to individual buyers who may use their unit whenever they like and place it into an organized rental program when they are not using it. Rental revenue is shared with the management company and helps defray the owner's expenses. Condo hotels are some of the most desireable real estate for both developers and investors. Some big name developers have jumped in with both feet. Donald Trump, for instance, already knew success with his New York Trump International Condo hotel and now has developed the Trump International in Sunny Isles Beach, Florida, another in Chicago, and he's planning additional condo hotel developments in Ft. Lauderdale and Toronto.
1. What are the main advantages of Condo Hotel ownership over other types of property such as single-family homes?
Most condo hotels are exceptional properties with amenities like health and fitness centers, business centers etc. They may also provide an expanded array of hotel services such as valet, concierge and maid services. Most are built on prime, highly desireable property which gives you high occupancy when rented.
You don't have to worry about advertising your unit for rental as the management company has contracted with a hotel reservation center to supply renters on a daily basis.
The owner never has to worry about any maintenance, upkeep or management issues, they are all handled by a professional management company on premise.
2. What is the main role of the condo-hotel operator?
The operator of the rental program, in exchange for a share of the revenue, markets the units as a hotel, takes reservations, operates the front desk, and provides the services hotel guests expect, such as housekeeping, food and beverage, and concierge.
3. How much of an investment will I need?
It depends on the location of the condo hotel, the size of the individual unit you select (studio, one, two or three bedroom) and the timing. Prices will range on the average from $180,000 to $400,000 on average.
First, it's important to note that many condo hotels are sold out in pre-construction. In those situations, most condo hotel developers require a 20% deposit, usually 10% at reservation and another 10% at contract, however, some developers require as much a 30% down, with the last 10% coming due at construction or at roof top.
4. How About Financing?
You can expect to pay at least 20% downpayment and about 1/2 pt increase in interest rate over a convential loan...Currently we are at about 7.1% on a 20 Year Fixed... we have financing available or you can use your own lender.
5. How well do these units resell? Will I Likely see an increase in price if I sell in five years?
Appreciation really is the best selling point for condo hotels. Mexico real estate has a long history of double digit appreciation. There's no reason to believe this trend won't continue for the future.
There are way fewer condo hotel units than traditional condos. It's interesting to note that most condo hotels sell out before construction is complete and there are very few re-sells available. As you know when demand exceeds supply, prices keep rising.
Furthermore, most condo hotels are built on prime property and offer amenities that traditional condos do not. Finally, as long as more people are looking to diversify their investment portfolios with real estate, condo hotels have a great deal of appeal.
6. How risky is this type of investment?
Far less than other types of investments. I don't believe that it is any more or less risky than any other type of real estate investment. Assuming your unit is in a building with no living or rental restrictions, then it is no more risky than buying a unit in a straight condominium. In fact, it may be a safer bet because when you are ready to sell, you not only have the building's amenities to offer a potential buyer, but also the services of a five star hotel and rental income from the rental of the unit.
7. Bottom line, is a condo hotel unit a good investment?
The answer depends on your main objective. In our opinion, condo hotel units represent a unique investment opportunity. If you plan to use your unit as a vacation home, a condo hotel can be a wonderful investment. You get a first-class vacation property in a highly desirable location. And when you're not using it, someone else takes care of renting, managing and maintaining it for you producing income. Talk about hassle-free!
Finally, the idel condo hotel unit buyer should be able to be satisfied with covering an adequate amount of expense from rent, but is more interested in the potential for long-term appreciation. In that case, the condo-hotel concept is a real winner!
