Condo hotel
The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (January 2011) |
A condo hotel, also known as a condotel, hotel condo, or a contel, is a building that is legally a
Condo hotels are typically high-rise buildings developed and operated as luxury hotels, usually in major cities and resorts.
Legal conflicts
The U.S. Government is very strict about the type of advertising that can be done vis-a-vis condo hotel projects. Some condo projects have advertised themselves as real estate investments, but since the value of these condos as a real estate investment is not entirely clear the U.S. Government currently disallows use of this reference when advertising condo hotels.[citation needed]
Condo hotels have been criticized in California for allowing developers to skirt laws designed to protect public access to beaches. Because such a facility has hotel rooms, it can be classified as a public accommodation, even though the majority of the units are privately held, and the facility does little to accommodate the public.[2]
In the Philippines condominium hotels carry a condominium real estate deed. This allows foreigners to acquire up to 30% of the condotel units, unlike most other real estate.[3] This has made this particular development popular in the country.
Location
While not intended as a complete list, the most popular locations in the U.S. for condo hotels include:
, andCosts
Note that analyzing the economics of a condo hotel unit is extremely difficult because of the challenge of getting accurate information about the potential income stream. Developers uniformly do not provide important data or estimates for room rates or occupancy levels for fear of coming under U.S. Securities and Exchange Commission (SEC) regulations on investments, as opposed to real estate regulations.[4]
Financial considerations
The primary factors that contribute to the financial outcome in ownership are rental revenue, appreciation or depreciation, lending and tax deductions.[citation needed]
Rental revenue is shared with the management company, and owners typically pay no upfront fees for management, which includes the marketing and reservation of the units.[
Many condo hotels, especially the branded condo hotels, have seen double-digit growth, and have out-performed traditional condos or single family homes in the same resort market. Condo hotels units are fee simple deeded real estate, and can be bought and sold like other forms of real estate. Because of the lack of resale data available for many of the emerging markets where pre-construction condo hotels can be found, experts heed caution when considering a condo hotel purchase for investment purposes alone.[5] Just like traditional real estate, appreciation is never guaranteed. This very scenario most recently occurred in Las Vegas. Several of the more notable condo hotels have sold for less in the resale market than during pre-construction.
Financing is generally costlier than for a primary residence.[citation needed] Mortgage rates may be a full point higher, and in the past this was especially true because financial institutions were unfamiliar with the condo hotel concept. Pre-construction purchases require a significant down payment, and buyers will not see financial return or be able to use their unit until the hotel is completed and ready for operation. Furthermore, owners may have to purchase extra insurance to protect against liability claims and some types of damage or loss.
Additional tax benefits may be obtained through condo hotel ownership.[citation needed] If the condo hotel is used for non-primary residence or residential rental, owners may be able to accelerate the depreciation on their condo hotel unit from 39 years, down to 27.5, 15, 7, and even 5 years. Condo hotel tax laws determine this, and affect individuals on a case-by-case basis, as each potential buyer's tax situation is different.
Homeowners' association fees and services
As with most condominiums, owners of condo-hotel units are required to pay
Exceptions aside, many of the fees and services found in HOAs are fixed and fluctuate very little from project to project. Services such as these usually include general unit utilities, common area utilities, individual room and building reserves, grounds maintenance,
Notes
- ^ Michael Corkery Condo Hotels: The Latest Twist In Buying a Vacation Residence The Wall Street Journal Online February 28, 2006
- ^ "'Condo hotels' controversy along Calif. beaches". NBC News. 28 August 2006.
- ^ "'Philippines Consulate' Owning Land in The Philippines".
- ^ Chin, Calvin (2007-04-17). "Guide to Condo Hotels - Part 2: Financial Analysis". Halogen Guides. Retrieved 2007-11-13.
- ^ Duggan, Ed (2006-07-21). "Condo-hotels seen as poor investments". South Florida Business Journal. Retrieved 2008-03-20.
- ^ Peterson, Tara (2007-05-23). "Condo Hotels: A Conceptual Overview". Premium Condo Hotels. Archived from the original on 2008-06-10. Retrieved 2008-03-20.