Condotel that doesn't bleed cash

[Brett Mazzerle]

I know they are not the best investment, but they do give me the flexibility to visit on occasion.  Are there any to absolutely stay away from, or ones that are generally better investments?  I know financing is an issue, so I would be most likely doing a cash deal.  I like the low entry point at Platinum, and am OK with the 60 days max occupancy.  Is it fools gold?

[Bill B.]

The platinum was exactly my poor introduction to condotels about 15 years ago when it was being built. I loved the location and the price. But then I ran in to the restrictions of how much personal time you could use it and you had to use their management team at a 50% fee. It’s nice if they’ve increased personal time to 60 days, it used to be either 2 weeks or maybe 4 weeks, but I think 2. 

It seemed more like buying shares in a hotel than real estate. Or even worse, a timeshare. I’m sure their “owners” were being charged maintenance fees even when they were closed down. Good deal for the hotel owner/operators for sure. 

[Justin Phillips]

I love Hawaii and would love to have an investment out there. However, I've come to the conclusion that it's smarter to buy a cashflowing property wherever you can find it, and use some of that cashflow to go on a nice trip. 
Mixing business and pleasure usually just ends up in less of both. Find a solid investment, then enjoy the fruits of your labor! 

[Brett Mazzerle]

Justin, thanks for your perspective.  I know the numbers make sense going that way.  I'm just intrigued with the possibility of owning some place I would like to spend a week here and a week there.  You are spot on.  Thanks.

[Loren Clive]

I have three condotels on Maui. All of them cashflow. But really I only use one of them personally on occasion. It's a hustle!

[Bradley Tessin]

Quote from @Brett Mazzerle:

I know they are not the best investment, but they do give me the flexibility to visit on occasion.  Are there any to absolutely stay away from, or ones that are generally better investments?  I know financing is an issue, so I would be most likely doing a cash deal.  I like the low entry point at Platinum, and am OK with the 60 days max occupancy.  Is it fools gold?

[Steven George]

Quote from @Loren Clive:

I have three condotels on Maui. All of them cashflow. But really I only use one of them personally on occasion. It's a hustle!

 Aloha @Loren Clive!  Thanks for your post as it was one of the first ones where I saw a condotel cashflowing.   When looking at the condotels, was there something(s) that stood out more than others that made this a good investment for you?  We live on Oahu but interested in investing in a condotel in Vietnam so seeing what the secret ingredients are :) 

[Loren Clive]

Price point. LOL. I also like buying them in locations with very few vacation rentals, like Hana or the N shore, to ensure high occupancy.

Managing them myself allows me to keep 25% more income. But of course this would be more difficult if I didn't live on Maui. 

In general, studios and 1brs do better than 2brs due to higher occupancy and lower carrying costs (AOAO fees and purchase price).

On Oahu I hear you can do well with studios/1brs in Waikiki. I have an agent buddy there who can point you in the right direction.

[Bryan Vukelich]

Hi @Brett Mazzerle

I actually know quite a few condotels on O'ahu that cash flow - and can cash flow quite well if it is self managed.  One example is a client who bought a 2 BR unit at Waikiki Sunset for $715k last year.  Ali'i Beach Rentals (a very successful vacation rental management company) currently manages a similar unit in the building and the owner of Ali'i told me last week it does around $8k in slow months and around $12k in peak seasons.  And I know other who have bought with financing and are cash flow positive.  

And quite a few of my clients intentionally bought in Hawaii as they wanted an income producing property when they were not using it themselves.  From what they tell me, it seems to be working out well for all of them.

A couple key things to note though:  First, for an STVR, you'll need to put down at least 25%-30%.  It varies for each building.  Also, if return on cash is most important thing, you'll find better opportunities on the mainland.  And for property appreciation, last few years have been rather remarkable here, but for the past 30 years, on average, condos on O'ahu appreciate about 4.8% annually.