I found this article on condo-hotel investments a bit alarming. Apartenly, owning this new real estate hybrid comes with some risks.
"Prices tend to be about 25 percent higher than comparable units in standard condominiums."
"Another thorny aspect is the legal use of the condo-hotel unit. Often, zoning rules limit the number of days you can occupy your unit, even though you own it."
"Expenses, including mortgage, taxes, insurance and maintenance fees, typically outrun income from the units, which gets split with the developer of the project."
The article ends with an example of how an annual Expenses & Income statement might look for a one-bedroom South Florida condo-hotel unit purchased for $300,000.
EXPENSES
Mortgage: $20,436 ($300k at 5.5% for 30 yrs.)
Property taxes: $9,750 (2.6% of value)
Insurance: $900
Maintenance: $7,860 ($642 monthly)
Total: $38,946
INCOME
Available rental days: 305
Average annual occupancy: 61%
Average daily rate: $285
Subtotal: $53,024
Less operator 10% fee: $5,302
Less 50% split with developer: $23,861
Total: $23,861
ANNUAL SHORTFALL
$15,085
It looks to me like it boils down to the occupancy rate. If the developer can keep the unit rented, you stand to make money. If not, there will be an extra expense.
Tax breaks can ease the bite, but the bottom line is buyers need to know what they are buying and who they are doing business with.
To learn more, here is a list of condo-hotels in Miami.
Legal issues with condo-hotels in Miami Beach 411's Real Estate News section.
