They have already hit Miami’s South Beach and are now sweeping over other popular vacation spots and big cities around the world. Condo hotels, a relatively new investment option, pair the services of a hotel with the ability to own individual units as in a condominium complex.
By purchasing a condo hotel unit, investors acquire a vacation property that can provide cash flow through rental income and can appreciate over time. A typical agreement between the condo owner and the hotel would revolve around splitting rental income, adhering to a furnishing policy and requiring both a maximum number of weeks the owner could occupy the unit as well as advance notice of occupation to the hotel by the owner.
Condo hotels are typically in establishments rated four stars or better and are primarily kept to premier beach-side or downtown areas. Many of the hotel industry’s big names, such as The Ritz-Carlton, Hilton and the Four Seasons, are getting involved in condo hotels.
Investors can expect to pay top dollar for a unit with one of the big names. For example, a three-bedroom unit in downtown Washington D.C. with The Ritz-Carlton cost $1.5 million, according to Forbes. Condo hotels are typically 25 percent more expensive than regular condominiums and also have higher monthly maintenance charges because of the extra services associated with the hotel.
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The extra charges may pay for themselves as helpful features for those who live in their condo hotel, but investors would probably find little use for many of the hotel standards, other than an upkeep and maid service.
Part of what investors will be paying for is the hotel’s service of marketing and renting their unit. Condo hotels present investors with a rental situation that requires little time and energy on their part, although monthly cash flow is usually split between the hotel and the owner.
Owners who wish to stay in their unit should know that not only is notice required so the hotel does not rent out the unit when the owner wishes to use it, but there may even be times when the owner can’t stay in the unit.
Condo hotels are a new form of property investment, so it is still difficult to determine how risky investing in them may be. It’s safest to stick with the most reputable hotel chains for condo hotel investing, as the amenities and prime locations will keep tourists coming back.
Other investments would likely provide larger payouts and higher returns than a condo hotel investment. But as vacation properties or business stops, condo hotels can offer investors someplace to stay as well as monthly rents. With the hotel responsible for maintenance and finding occupants, investors can sit back and enjoy an investment that requires little work on their behalf.