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Thursday, August 2, 2007

Condo Hotels

About 20 years ago Miami condo hotels lacked quality and prestige. The curse of changing tax laws made them less attractive investments and many of the Miami condo conversion projects were in trouble.

The ‘Condo Hotel’ was reintroduced in the 1990s when The Mutiny, a hotel in Miami’s Coconut Grove area, was converted and its buyers hit the jack pot with unit prices increasing 10 times from beginning to sell-out. Miami began to see more developers following suit and revamping old hotels or constructing them brand new.

Today Miami Florida real estate consists of approximately 60 condo hotels and by 2008 between the U.S. and around the world there will be several hundred condo hotels.

But before you decide to invest you must make sure you have educated yourself with all aspects of the condo hotel market.

Condo

A condo hotel or a Condotel, as defined by Wikipedia is…” a building used as both a condominium and a hotel. This type of residential building meets several needs that make it attractive. As development costs increase, the cost of hotel development can make developing new hotels difficult, especially in major cities. By selling the units as condos, the developer moves much of the development cost to the condo owners. By owning units that can be rented as hotel rooms, the owners are able to get a return on their investment allowing them the ability to own a residence in a resort or major city.

The revenues produced from the rentals of the unit when the unit owner is not there is split 50/50 between the hotel and owner.

Condo hotels are continuing to thrive regardless of the slow down in the real estate market, thanks to the 74 million baby boomers that are looking to buy a residence or invest in a condo hotel.. It is estimated that currently 10% of every hotel project is a condo hotel.

Buyer Basics

A condo hotel unit can be a prime real estate investment that is hassle free and that takes care of itself. The unit’s owner is the recipient of five-star amenities and numerous other luxuries as long as he is in residence. Not only does the hotel maintain the property when the owner is not there but they are also offsetting their expenses by generating income from the hotel’s rental program.

Make sure you buy your unit in preconstruction stages. If you are more interested in a profit, consider becoming a landlord.

Developer

Because a developer can recoup much of their construction costs up front, condo hotels make good financial sense. Approximately 50% of the revenue form the condo hotel rental program goes to the developer and they retain whole ownership of the property's meeting facilities, spas, lounges and restaurants.

A big challenge for developers however is how the building is maintained and operated. For example, the developer retains control over the look of the building in carpets, lobbies and hallways while staying within the legal structures outlined by the specific State.

Most importantly, developers do not want to violate SEC regulations and must try to avoid focusing on the economics of the rental program.

Prime Land and Hot Sand

The risks have not detour the wild crusade of condo hotels popping up around the world in Mexico, Panama and Costa Rica. Trump, the number one developer in the business, will get $700,000 for a studio unit in Fort Lauderdale, Fla., but costs about but a similar sized Trump unit in Panama City may only go for $300,000 and the 423 residences in Trump Tower Waikiki Honolulu sold out in one day.

Dubai, where theme parks that will total more than twice the size of Orlando's Walt Disney World are under development, has some of the best deals in condo hotels today. Las Vegas, specifically Vdara, a planned condo hotel in the MGM Mirage (MGM) City Center has been recommended as one of the top places for condo hotels in the U.S. In Kauai, Hawaii there will be 323 resort condos completed by 2009. The Ritz Carlton Hotel Company, combines residency with their legendary services of including personal chefs and concierge services. In Aspen, instead of paying $5 million for a vacation home the new class of buyer is purchasing three-bedroom residences for approximately $300,000 and using it for four weeks or more a year.

In short, if you want a prime vacation spot without hassle or strain, a condo hotel is smooth sailing-just do your homework first.




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