I can't sit here and paint a perfect picture about condo-hotels because it wouldn't be me. The condo-hotel concept has become a very popular trend mostly because of the incredible vacation and urban destinations as well as the resort-style luxuries that these have to offer, especially when luxury hotel chains back these up. Wouldn't you be prone to investing in a project that includes Marriott, Four Seasons or even Ritz-Carlton?.....that's what I call bringing "credibility" to the closing table.
The concept does have risks for both the developer and the condo buyer and it has to do with the way the actual sales are structured. Mike Schneider, an Associated Press Writer explains that if units are sold with the expectation that the buyer will earn money or get tax benefits from the purchase, then these would be considered "securities" by the Securities and Exchange Commission and could only be sold by a securities broker, which would mean that the developer would be an easier target for law-suits under the SEC's anti-fraud rules.
Most developers choose not to sell their projects as securities and are thus prohibited from discussing economic or tax benefits from a rental arrangement and no projections on rental income can be discussed.
This is HUGE to a prospective buyer because you could be buying without getting all the facts. It is crucial that you work with someone that can produce those projections and analyze the numbers so that you know where you stand when in comes to the investment.
Our customers benefit from Rick's accounting background, since he can produce these projections and help customers make educated decisions with complete financial information necessary to purchase condo-hotels.
Look for Part II of this series with expectations from condo-hotel buyers. Same article appears in http://www.miamism.com/
other sources for condo- hotels information:
- Miami, Florida - Ines Hegedus-Garcia - Condo Hotel Craze
- Celebration, Florida - Colleen Kulikowski - Orlando Florida | What is a Condo Hotel?
- The Mortgae To Go Guy - David Podgursky - Florida Mortgage Loans | Condo-Hotel/Condotel Financing Explained
- Clearwater Beach, Florida - Cyndee Haydon - Clearwater Beach Florida Condo Hotels - growing option in Luxury Vacation Homes and Resort Ownership
good info Ines...
it should be noted that from the Lender side, the rental pool much be Voluntary... and rental income cannot be used to qualify
if a borrower should choose to use their room full time or rent it full time, the income amount will vary anyway. Based on rate hikes for seasons, events etc the income can't be 100% consistent so lenders want to make sure borrowers understand that the loan is affordable to them in their current budget.
That sounds like a good market...everyone wants to own a vacation place. If I wasn't into motor homing I'd be interested.
David - that is the type of useful information we need to supplement these articles. It goes hand in hand with buying a security as real estate and getting financing as such. Thank you!
Mariana - condo-hotels can be very complicated, and a lot don't provide all the necessary information to make an educated purchase. There was recently a developer in Miami selling a condo-hotel project in Orlando and guaranteed expenses to be covered by their hotel program. What they didn't tell you is that you needed to spend another $40,000 in a decoration package and if you did not join the hotel program, you could not use the common area facilities.
Ines, I read the article that you linked to, and gives an idea of the price for one of these Condo Motels as being in the range of $750,000 for 1,100 sq. ft. unit, that is a lot of vacationing :)
By the way it is good to have you back from vacation, hope you and Rick had a great time.
Did you miss me George??? : )
I think the article is not up to date - a lot of these prices have dropped a bit and it really depends on location, and view. I do think you can find a 1,100 square foot condo-hotel for a bit less than $750K.
Ines, well I guess if it is a bit less then it is OK ........ LOL
And yes you were missed, and you have a lot of blogging to catch up on :)
Sally - thank you! it's good to be back and good to be loved : )
George - prime oceanfront miami property.....what do you expect? : ) I have A LOT to catch up on, that's for sure!
Hey Susie - it's good to be back and I will definitely do a post on the paradise I just visited. I have not been to Brandon, but I am sorry to tell you that I don't think ketchup is anywhere in your bright future.....but maybe a little mustard. ; )
Ines,
The jury is still out on condo-hotels as investments. I was reading an article today in the Daily Business Review that they analysts are starting to chatter that they market may be become over-saturated.
For a client to be truly happy with their condo-hotel purchase, they should buy it for the right reasons.
Since we as Realtors are not allowed to discuss anything with regard to the investment ONLY the real estate, I tell them not to expect to cover their costs of the unit. There are too many variables that change, rack rate, occupancy rate, rotation, weather, etc.
Colleen - thank you for your take in Orlando - it's good and complete information for our customers.
Cyndee - you are so sweet - glad to be back! Let's keep those posts rolling!
Kevin - part II of this series will be about just that. There are many reasons to purchase condo-hotels and people have to be clear about their goals - developers cannot share all the information and there are way too many variables to take into consideration. Thanks for your take on this.
You're welcome Ines.
Bill - I did not state that Realtors are not allowed to discuss potential revenue, I said developers choose not to because they don't want the liability. As Realtors we are allowed to use all of our knowledge to advise our customers.
Rick, as a commercial Realtor does financial projections on a regular basis because of his accounting background and can does projections for our investor customers as well. One thing is not being cabable and another totally different is not being allowed.
I hope I cleared that up.