Premhouse.com JAKARTA | Question: Do you have any
tips for evaluating a condotel purchase as purely an investment
property? The one we are looking at is in a new multi-use redevelopment
project in downtown Branson, Mo. — Clyde Burnett, Little Rock, Ark.
Clyde: “Condotels,” also known as “condo hotels,” are typically condominiums in resort or downtown communities. A condotel looks and feels to visitors like a hotel or resort, but in these resorts, individuals have the opportunity to purchase individual units. Unlike a timeshare, where buyers pay for limited use of a resort, buyers of a condotel own their residence outright and can stay in it, rent it out, or sell it according to their own wishes. In these communities, in-house management companies rent out the units on behalf of their owners in exchange for a percentage of the rental income.
Condotel owners and their renters often have use of the resort’s amenities, such as concierge, fitness and spa services. Whether an owner can use the amenities while a renting guest is staying in the unit depends on the rules of the particular condotel development. These condos make up a relatively new investment category and account for less than 10% of all vacation homes and investment properties in the U.S., according to the National Association of Realtors. Owning a condotel differs from buying and managing a condo in several respects, says Joel Greene, president of Condo Hotel Center in Miami, a real-estate agency that specializes in the sale of condo hotels throughout the country.
Clyde: “Condotels,” also known as “condo hotels,” are typically condominiums in resort or downtown communities. A condotel looks and feels to visitors like a hotel or resort, but in these resorts, individuals have the opportunity to purchase individual units. Unlike a timeshare, where buyers pay for limited use of a resort, buyers of a condotel own their residence outright and can stay in it, rent it out, or sell it according to their own wishes. In these communities, in-house management companies rent out the units on behalf of their owners in exchange for a percentage of the rental income.
Condotel owners and their renters often have use of the resort’s amenities, such as concierge, fitness and spa services. Whether an owner can use the amenities while a renting guest is staying in the unit depends on the rules of the particular condotel development. These condos make up a relatively new investment category and account for less than 10% of all vacation homes and investment properties in the U.S., according to the National Association of Realtors. Owning a condotel differs from buying and managing a condo in several respects, says Joel Greene, president of Condo Hotel Center in Miami, a real-estate agency that specializes in the sale of condo hotels throughout the country.
Unlike typical condos built by multifamily housing developers,
condotels are often developed by hotel and resort companies — such as
Starwood Hotels & Resorts Worldwide, Hilton Hotels Corp., The
Ritz-Carlton Hotel Company, LLC, and Four Seasons Hotels and Resorts.
The price you pay for a unit may be substantially higher than that for a
“regular” condo. For the extra cost, you have access to the services of
an in-house management company, which will market and rent your unit
out for long or short periods of time (even nightly). The management
company’s rental program will charge you a portion of your rental income
(typically 50%), and will handle the maintenance of your unit,
groundskeeping and the clean-up after your renters leave. It will also
oversee guest amenities such as pools, tennis courts and golf courses.
If you bought a “regular” condo and hired an outside management firm to
market and lease your unit to renters, there may be less flexibility
when it comes to placing your unit in and out of the rental program, and
the firm may not market your unit nationally in the way that a large
hotel company might, Mr. Greene says.
When looking to invest in a
condotel, research the local real-estate market (e.g., are prices on the
rise, or has the real-estate market peaked?). Study regional tourist
activity and hotel occupancy, since a condotel unit, especially if it is
run by a hotel operator, may be marketed like a hotel room. The
location of your unit has the potential of figuring prominently into how
profitable an investment it is. Jerry Yeiter, past president of The
National Real Estate Investors Association and president of Yeiter &
Co., an accounting firm in Houston, says some investors have had
success with condotels in Florida and Arizona because these destinations
offer desirable tourist activities and because these buyers purchased
at a time when area real-estate prices were appreciating.
Ask yourself
whether Branson can attract tourists. I checked with the Branson Lakes
Area Chamber of Commerce and Convention and Visitors Bureau, and was
told by Jennifer McCullough, public relations director, that Branson,
which is in the Ozark Mountains, draws more than seven million tourists a
year. Factoring in visitors who stay in rented vacation condos, the
combined hotel and condo occupancy rate in Branson is 62% to 63%,
according to the town’s chamber of commerce and convention and visitors
bureau. If you buy before a condotel project is fully built, you may be
able to purchase your unit at a lower cost, as developers tend to offer
the lowest prices pre-construction.
You may have to wait until the
project is completed, though, before you can rent out your unit.
Estimate how much you can fetch per night and how often you need to rent
the unit out to bring in enough to cover your mortgage and other
expenses. “It’s all about the numbers,” Mr. Yeiter says. “You’d have to
look at the rules and make sure the property would be suitable for an
investor.” Some management companies, for example, stipulate how often
you must make your place available and even how it should be decorated.
By Jane Hodges
(Reprinted from www.RealEstateJournal.com,
the Wall Street Journal Guide to Property)
the Wall Street Journal Guide to Property)
Photo courtesy of jualpropertyjakarta.com
