-their called condotels from wall street journal real estate or
rentlaw.com
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.
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