Thursday, March 06, 2008

What about Investing in a Condo-Hotel?

Orlando has been listed as the 3rd largest condo-hotel market behind Las Vegas and Miami. But does it make is a sound investment?

First a condo-hotel are condominium units that are utilized as second home, and/or rented out on short term basis to people on vacation. The home owner is allow to occupy the residence for 90 to unlimited days out of the year, depending on terms of rental program. If you opt to rent it out, there is onsite property management company that will rent out your unit and offer amenities just like a hotel.

One our of our clients asked if purchasing a condo-hotel is a good investment. Our buyers agent office does not recommend someone to purchase a condo-hotel for investment.

There are things to consider as an investment:
  1. There are several popping up, and with a slowed market some projects have been delayed or not started.
  2. Fluctions in tourism/visitors, we are temporary decline. Occupancy fluctuates with tourism traffic.
  3. Difficult re-sale. These units offer small spaces, at high prices. On a resale the pool of buyers are limited, as it can be only used as a second home and not primary residence.
  4. No track record of income potential. The rental programs are prohibited to discuss income potential or specifics. And since this fairly newer concept many of the developments have no track record of income vs. expenses.

Condo-hotels make a lot of sense for someone looking for personal use or a corporation wanting -it for business purposes. However, for an investor who will borrow money, it is a guaranteed loosing proposition.

Even if it were rented 100% (which is totally unrealistic) there is no way you would keep your head above water, and to re-sell less than 600 square feet for around the $400-500K mark a few years from now would probably be impossible.

So, what would we recommend?

We would recommend something less expensive.…also consider something downtown which is being re-developed or the new condo projects in Maitland where they will be re-building the entire downtown of Maitland which is going to be the biggest city change in Florida. The Lake Nona area is another possibility….or even a short-term rental townhouse near Disney, many of which you can pick up for less than $200K.