Condominium Hotels - a Luxury Investment Option
The best thing about real estate is that it offers enormous options for you to invest in. Condominium hotel is one such luxury investment option available in real estate which offers attractive benefits.
If you are a newbie to this dangerous game, this article may shed some light and give you some basic knowledge of condotels to kick-start your investment journey.
Firstly, What's a Condo Hotel?
A condo hotel is a legal condominium building but operates like a hotel serving the purpose of both - personal use and commercial use to the investors.
They are otherwise known as 'condotels' or 'hotel condos' or 'contels.'
Condo hotels are generally high-rise buildings developed and operated as luxury hotels, typically in major cities and resorts. These hotels have condominium units which allow individuals to own a full-service vacation home. And when they are not using this home, they can leverage the hotel chain's marketing and management to rent out their unit to the vacationers and manage it as they would do of any other hotel room.
Factors Affecting the Condo Rental Income
Several factors have the potential to affect the rental income.
- Desirable travel destination - who wouldn't want to travel to the most happening and beautiful places? So, if the condo hotel is in the vicinity of such a desirable vacation spot, then it can attract more people to reside and hence, earn good rents.
- Best amenities package - Amenities that are generally provided to transient renters include dining, fitness centers or wellness centers, housekeeping, valet parking, concierge services, etc. So, if a condo offers the same amenities or even more, there are chances that it can attract a good number of vacationers.
- Proper management of the unit - Even the amenities may sometimes get sidelined but never the hospitality and good management. So, you always have a good management company.
- Competition in and around the area - Lesser the competition, more will be the incoming of people seeking a rental. Thus, more is the rental amount the condo can make out.
- Revenue split agreement - The rental income can be evenly split between the owner and the management company, or the balance may even favor the owner.
Have a Clarity of Who Pays for What
Condo Unit Owners’ Charges
These are the charges that the condo unit owners are responsible for paying:
- The purchase capital
- Fees including the HOA's (homeowners' association fees will usually include security features and upkeep to the outside of the building, such as weather-proofing a condo unit along the oceanic coast).
Hotel Rental Agency's Charges
These are the charges that the hotel rental agency is responsible for paying:
- Marketing expenses
- Bookkeeping, functional, and administrative expenses
- The cost of running a customer service desk in the condotel
- Daily hotel amenities expenses, including all the maintenance and housekeeping charges.
Other expenses are negotiable, which includes furnishing and significant repairs. It is typical to keep a reserve between both parties to cover substantial expenses that may arise.
How Good of an Investment are Condotels?
The short answer is that it all depends upon your needs. If you plan on using your condo unit as a vacation home for only a small period of the year, it is an interesting opportunity. The hotel concept for condo owners makes renting out the unit a systematic and organized process.
Also, hotel brands usually have 'smart' booking software that can increase or decrease hotel room prices precisely based upon demand. This type of pricing sophistication is a wonderful resource. It will typically allow you to make the most money per night on rentals compared to trying to rent the unit out by yourself on a nightly basis, which isn't feasible.
Apart from yielding rentals, they also offer high capital or value appreciation of the property in the long run. Much like other real estates, value appreciation of condo property depends upon larger macro-economic influences.
Owing to such an excellent investment option, the market for condotels is quite high in places that can attract several tourists like the US, Dubai, Miami, Thailand, Philippines, etc. The scenario is such in foreign; many of the Indian investors are now entering into this field of real estate. The market for condotels in India has already started in places like Bangalore, Delhi, Pune, etc., and probably in the near future, it is expected to increase substantially.
Keynotes While Buying
An old proverb states, 'you make money on the buy, not the sell.' Therefore, it is essential to look closely at your acquisition price on a rupees per square foot price basis and compare the price paid to other similar competing condo-hotel brands. Buy smart, and you'll make good money.
Timing is now good in India. This is the best time to get going with the investment because it's the newest one to the Indian real estate market, and thus, there are only very few competitors.
Owning a condo unit from a great hotel brand can give you enormous personal pleasure and a big investment plan. And considering all the aspects, a condo-hotel purchase is not something to be taken too lightly. It also certainly has some degree of complexity. However, you don't have to be dissuaded looking at the expenses or complexity or any other added risks because it also rewards excellent. All you need to do is:
- Work with individuals that can provide you the proper insight and data on how your deal stacks up against the various other comparables.
- And do enough homework about the condo you are planning to invest in, it's location, the developer, the market conditions it is in, the hotel agency that's associated with it, and many more. Make it a point to be sure of every detail before you get into the investment.
If you can make a shrewd move of buying the right condo building or a condo unit at the right time, your investment will most likely be a fantastic event.
A condotel is a property that is legally a condominium/condo but functions like a hotel serving both the purposes of personal use and commercial use to the investors.
The factors that have the potential to increase your rental income are:
- Location of condotel.
- Amenities that your condo unit/condotel offers
- Good management
- Competition in and around the area
- Revenue split agreement
The charges that you have to pay as a condo unit are the purchase capital, taxes, repairs, insurance amount, and fees, including homeowners' association charges.
The fees that you have to pay as a hotel agency in association with condotel are the marketing expenses, bookkeeping, functional and administrative expenses, the costs of running a customer service desk, and daily hotel amenities expenses, including all the maintenance and housekeeping charges.
The goodness of the investment depends upon your needs. If you plan to use your condotel only as a vacation home, it serves as the best investment option because, in the times when you are not using it, you can rent out your condo unit and earn rentals. Also, as it is a real estate investment, you'd even be getting the value appreciation on your property in the long run.