Condo-Hotels Are a Great Investment… Sometimes

Condo-Hotels Are a Great Investment… Sometimes

A number of hotels settled in premium resort locations are making their guests a unique proposition these days: You can purchase this room as a condo unit and we’ll rent it out while you are gone. The thought is that you can stay in the condo anytime you wish, build equity over time, and collect rental income while you’re gone. In fact, many hotels even indicate that your rental income will be more than sufficient to cover the mortgage payment!
This proposal may sound like a pretty nice deal for you, but the realities show that it’s even better for real estate developers. These hotels embark upon these projects since they can cash in on the immediate proceeds from the sale of condominium units, shift all the risk to consumers, and still collect 50-60 percent of the rental income in the future. The deal is so good to these developers that they frequently massage the numbers to make them appear better to you.

The Promises and The Facts“

Rentals cover most of your mortgage!”
Rental values and occupancy values are ofttimes exaggerated in order to make the sales pitch much gentler- after all, who could decline to purchase something that is basically free? In reality, rental income slips from time to time and mortgage payments can gain month to month. It’s critical to look at the facts behind the data to determine if the numbers in the sales literature agree with reality.

“You are able to vacation as long as you wish!”

Buyers are permitted to stay in their condo as long as they wish and aren’t even expected to rent it out at all. Nevertheless, condo management fees still apply and without rental income you will be responsible for the full mortgage payment. It’s important to consider other potential alternatives for vacation rentals to see if the additional costs of condo-hotels can be rationalised.

The Bottom Line

The bottom line is that buyers need to do some homework before they take the plunge into the hospitality business. Take a close look at rental values and occupancy rates to decide if renting addresses all costs, since that is seldom (if ever) the case. Rental income can also fluctuate greatly with the economy in general, so buyers ought never count on that income to subsidise the bulk of the condo’s costs. In conclusion, condo-hotels can ofttimes be one of the best second-home purchases available thanks to their unique nature, but be a dilatory purchaser.