With Condo Hotel you are purchasing Real Estate, NOT Revenue. The SEC regulates/restricts any forward looking statements made by the condo hotel industry. It is important for you to do your own research. This is an attempt to help you begin this task, but this should be a starting point, not an end. Our concern is that our borrowers know clearly what they are buying, and can afford the monthly payments should there be NO rental income. Hassle-free rental income as an offset to ownership expense is the an advantage to condo hotel vs a traditional condo. If you must hire a management company for your traditional condo, and are limited to weekly rentals (which should generate less on a per night use than nightly rentals) your net rental income should be higher for a condo hotel, with less hassle on your part. Your time and money invested has a value that should be used in your determination of the value of your purchase. Services and amenities are also important, both add an expense of ownership, and a benefit for rental potential. The Math: Consumer
Since most people dont use a second home more than 30 days per year; a cottage or a condo hotel unit is likely vacant for 330 days/yr. IF we Assume a hotel runs a 65% occupancy = 214 of potential rentable days. IF the Average Daily Rate (ADR) is $175/night = $37,537 year in potential gross revenue. ($175x214=$37,537) Many condo hotel Rental Management Agreements (RMA) pay a 41-50% split with hotel management. Assuming this, your income could be $1,370/mo before your expenses of Debt Service, Taxes, Insurance, Dues. At current market rates, $1370/mo supports roughly a $250,000 loan (before taxes, dues, insurance). Numerous assumptions have been made in this example. Hotels traditionally have seasons, and regularly require maintenance and improvement. With Condo Hotel you are purchasing Real Estate, NOT Revenue. Tax Benefits, Potential Appreciation, and Hassle Free Use are other benefits of this form of real estate ownership, but every purchaser should consult their financial advisors. If living in a luxury hotel, dining out, with turn-down and maid service is your idea of first-class vacation living... and you don't want to pay for your second home while you back home then you are a candidate for Condo Hotel ownership. |
Home
