Monday, February 10, 2014

Investing in a condotel

Property investments are evolving into new kinds of opportunities such as the relatively new condotel or condo hotel.

Condotel units are typically bought as second or third homes. They are suitable for people who are interested in buying a vacation home, but would rather forego the headache of routine maintenance.

A condotel is a condominium building with hotel operations such as a front desk, cleaning services and short term leasing. Most condotels are located in major cities and resorts, thus taking advantage of prime property locations with high tourist or business traffic. 

Ownership

Ownership of a condo hotel unit is much like that of a condominium unit. Apartments are individually owned, such that a 400-room condotel can have as many as 400 owners; whereas in a typical hotel, there is a sole owner or company running the hotel operations. 

Income

A condotel unit owner may place his unit with the condotel’s rental program. The unit will then be leased out just like any hotel room. 

Unit maintenance, cleaning and other amenities will be cared for by the condotel operator while profits are usually shared between the unit owner and condotel owner. However, the division of profits may vary depending on the particular condotel. 

Fees

As with most condominium developments, condotel unit owners are also required to pay monthly dues, which may also vary depending on the particular condotel. These fees are used for common areas and facilities such as pools, gyms, parking, general upkeep and maintenance, building administration and security. 

Investment

Condotel units are typically bought as second or third homes. They are suitable for people who are interested in buying a vacation home, but would rather forego the headache of routine maintenance. 

These are also a good alternative to buy-to-let investments, as a condotel investment is essentially the same, sans landlord duties. 

With these obvious advantages, there are real risks to this type of investment as well. Occupancy rates may not be proportionate to your projected return on investments, since occupancy rates are dependent on a variety of factors such as the economic climate and potential property damages. 

If you intend to use your condotel unit as a vacation home, you may also need to reserve your own unit in advance.


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