Ever bought a condo hotel?

Question

I am wondering if anyone out there has invested in condo hotels.  I would like to know if the income supports the high asking price by the developer.  Due to SEC rules, the hotel management company does not provide any financial infomation which makes the decision making process very difficult.

I'm looking to purchase one in either Myrtle Beach, NC or Miami, FL. I was hoping someone could share their experience in owning one and if the rent revenue covered the mortgage costs?

Thanks!  :D

Wes Tuinstra · Answer

OK, I'll be the guy that reveals his ignorance!

I know what a condo is and I know what a hotel is, but...

How does a condo hotel work? And what are they asking?
You know, inquiring minds....

Andrea M. · Answer

I've come across many of these for sale in the Gulf Shores/Orange Beach and Destin areas at really good prices and wasn't really sure how they work.  I even emailed the listing realtor and asked to explain and never even got a response.  I have stayed away from them because I didn't really understand how they work.

N/A N/A · Answer

That does help a lot, and is consistent with much I'm finding. Thanks a lot!

David O. · Answer

Here on South Beach, a lot of buildings operate as condo-hotels. While you can make great returns by acquiring the right unit at a good price, it is very difficult to find under market value units from all the competition around. Also, like mentioned earlier, the HOA fees on these buildings are very high and vacancies can destroy your cash flow if not done correctly.

Ricky Margan · Answer

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Account Closed · Answer

@Johan Cruz

David C. · Answer

I'm looking at a condo that's a quasi-condo-tel - there's an optional front-desk-management program, to be in it, you must live up to the hotel finishes, but as a condo owner, you may opt out, and live in your condo, or use whatever management company you want to manage it.

On a cash-flow basis, its a loser, its far from the 2% rule, but because its in a vacation area, the occupancy is low in off-season, so you can have off-season use of your condo without really giving up any revenue.  You can do 'in-season use' during the week, and not give up much income either, as weekends are always more popular anyway, you pick which days your unit is 'off the market' and they just make your unit 'booked' in their hotel system those days.

2% rule is so far away I'm ashamed to ask about it.

Cost: 195,000

Annual Costs:
Taxes 1633
Gross Rents 2012: 24,300
Annual Condo Fee: 6000
Pay 22% to the front desk: 5400
Pay maid fee for booked nights: 2000
Pay parking fee for booked nights: 1050
Electric: 1200
Netting: ~7200/year or $600/month for P+I

so... to get to cashflow neutral ASSUMING NO ADDITIONAL REPAIRS(which is quite a bad assumption).  You need to put down 25% and get a mortgage under 3%.

So... if you don't count your 'use' as a significant 'return' - this is a total loser, right?  Even if you do, this is a loser from a financial perspective.  The only way it works is as 'speculation' which just means 'it doesn't work but you are hoping for magic' - right?  It does give you a 'no-work' exposure to real-estate by using their front desk program.  But if 'no-work' goes along with 'negative return' - its not attractive.

Supposedly these have been selling for over 200,000 lately and this is a 'motivated seller' situation.

At what price do these numbers 'make sense'?  160k?  100k?

In a vacation resort area, do the values ever make sense?

I know its meaningless, but these originally sold back in the condo heyday around 270,000.  Which I'm sure never made any sense.

Any thoughts on this?

Bob C. · Answer

I've been trying to buy one in Ft Lauderdale. The issue is that the management company keeps 50% of the rents and then the monthly association fees and property taxes take the rest of the income.

Jim S · Answer

I remember reading that a cruise ship was doing the same thing. Don't remember any details.

Ron NA · Answer

yes. i got one few months ago. a unit on the beach 3rd floor. 
its really cheap down there in Myrtle.

Ever bought a condo hotel?

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