What every investor should know about Condo_Hotels

What is a Condo Hotel, and are they good investments?

I have been involved with Condo Hotels for many years; In business relationships with the developers, and also as a property owner and investor.

I travel a lot, often to the same destination over and over again. I also love certain activities (skiing, snowboarding, mountain biking to name a few). Because the properties I have chosen are in destination resorts, they suit my lifestyle and have worked out really well.

But what exactly is a Condo-Hotel? In a nutshell, a Condo Hotel (or Condotel as they are know in the industry) is a hotel where each unit (typically a suite) is individually owned, and when you are not staying in the unit, it is rented out to the paying public on a nightly basis.

If you have ever stayed overnight in a ski resort, or a popular tourist destination in Florida, Hawaii, or Las Vegas, you may even have stayed at a condo-hotel. And if you did, someone earned a portion of the money you paid to stay there.

Condo hotels evolved during the 1990’s and there are now 100’s of properties located throughout North America under brands including Hilton, Four Seasons, Clarion, and Ritz-Carlton. Even Trump has a few properties currently operating or under development.

Despite the fact that the property is in a hotel setting, a condo hotel is considered a private residence, and owners are eligible for mortgage interest deductions and other tax advantages that come from owning a second home. However, most properties do not allow you to live in the unit year round. This is because the management company does want to rent the unit when you are not there, so both parties can profit from the rental income.

Each condo hotel property has its own residence restrictions that indicate the maximum amount of time you can live in the property. This is an important piece of information to consider before purchasing a condo hotel unit. Most owners do not intend to live in their condo year round, so this is not a concern in typical circumstances but insure you are aware of potential restrictions before your purchase.

If you are looking at a pre-construction property (which there are many of these days), then the deposit is usually due in stages with the final payment coming when the project is completed.

There are advantages to getting in on the preconstruction phase, and that is usually when you will get a best price compared to completion, however, you really need to make sure you do your research on the developer and property to make sure they have the resources and track history to complete and manage the project.