Do Condo Hotels Make Good Investments?

Condo Hotels - Joel Greene

Heard all the chatter about condo hotels?  Does the concept sound like it might be right for you?  If you’ve been considering the purchase of a vacation home, one that you’ll use two to four weeks per year, it could be just what you’re looking for.  But before you buy, be sure you understand the benefits and potential risks.

 

While many people see condo hotels as investment tools, developers, in accordance with Securities Exchange Commission regulations, sell them only as real estate.  They suggest that you focus not on potential returns but on the benefits of owning a luxury home that comes complete with four-star or higher hotel services and is located in a vacation destination that you’ll enjoy.

 

Condo Hotels Offset Costs with Rent Revenue

One of the key benefits of owning a condo hotel unit versus a traditional condo or single-family house as a vacation home is that you’ll receive some rent revenue whenever you’re not using your condo.  However, cash flow should not be the main reason to buy. 

To set realistic expectations, think of the revenue generated by your condo hotel unit in the rental program as helping to offset the costs and mortgage of owning a vacation home.  If you end up with an additional annual return (most likely no more than 10%), consider it a bonus.

 

Buy in Pre-construction to Maximize Appreciation Potential

If investment is your prime motive for purchasing a condo hotel, then appreciation is a more realistic focus than average annual return. 

Like any real estate, if you buy at the right time, in the right location, you can make money.  In the case of a condo hotel unit, buy in early pre-construction stages, and you have the best chance of realizing a significant profit from appreciation in value when you eventually sell. 

That’s because as the condo hotel is being built, developers implement planned price increases at various stages of the selling process.  You’re essentially buying tomorrow’s property at today’s price.  Plus, while the property is being built, real estate in general is likely to appreciate.  The result is that when you do finally close, you’ll have instant equity. 

Keep in mind that your actual profit, of course, depends on the general market conditions, interest rates and competition.

 

Can Condo Hotels Be Flipped?

If you place a deposit on a condo hotel unit in the pre-construction phase, can you sell your contract to another buyer without ever having to close?  While flipping was a common practice a few years ago, today most condo hotel developers frown on this practice. 

Developers typically do not allow investors to sell before closing on their unit and clearly state this item in their contracts.  They don’t want speculators buying their project and falsely inflating the prices.  More to the point, they don’t want to compete with you to sell their remaining units. 

Nonetheless, if you buy a quality property in a good location, you could end up with not only a great vacation home that you’ll enjoy for years but also a real estate investment that appreciates with time and will net you a profit when you sell.
 

Joel Greene is the President of Condo Hotel Center located in Miami Florida, which specializes in the sale of condo hotels.  Visit his information-packed web site, www.CondoHotelCenter.com,for more on condo hotels and to see condo hotel listings, photos and prices. 

You can also sign up for his free Property Alert newsletter to be notified when new properties come on the market.  His other condo hotel websites include www.TrumpCondoHotels.com, www.CondoHotelsDubai.com and www.CondoHotelsBahamas.com.