What Is A Condo Hotel?

A few years ago, when just about anyone could get a loan for any type of real estate, condotel conversions became big business and took off like wildfire.

Condotels or condo hotels are converted motels and hotels. Hotels and their facilities are converted into condominium type units that are sold to individuals for their own use and as rental units. It seems simple, but that 's not always the case. Different buildings have different sales conditions and restrictions after purchase.

Most of the time, condotel units are simply converted hotel rooms. Sometimes they are upgraded, but quality and style vary greatly. If the converted hotel was a luxury property, the rooms are probably of higher quality and larger. If an old low-end hotel was converted, the rooms will be smaller and of lower quality and less stylish. Many of the units are without kitchens – they are just like living out of a hotel room.

Every building is different and is sold and managed in a different way. This can be frustrating for buyers trying to compare different units in different buildings. The rules, restrictions and fees can vary greatly. Restrictions on a maximum number of days you can stay, the share you receive of rental income, and whether the management company collects fees whether you rent the unit privately or they rent through their efforts.

Financing is often more difficult that for many other types of real estate. It's estimated that fewer than 3% of banks and mortgage lenders have programs for condotels. Down payment requirements will probably be higher and interest rates will be higher than for other property types.

A condo hotel can still make sense for a lot of people if they go in with realistic expectations. Many of these conversions were very well done and the quality of the rooms and amenities is high. Some are in popular resort towns. The idea that you can rent the unit when not using it is attractive.

Being realistic though means understanding that it is unlikely that a condo hotel units will provide you enough rental income to make mortgage payments and cover taxes, fees and insurance. You may get a good portion of expenses offset, but positive cash flow is not likely.

Find a real estate agent if you are interested in buying a condo hotel, but not just any agent. Find an agent who specializes in condo hotel and condotels. This may be difficult because there are specialized requirements, but prices are lower and the transactions are more complicated and require a lot of work. A lot of agent are not interested in selling condo hotels.

Buying a condotel or condo hotel is a true buyer beware situation. You must understand everything you are signing. Hiring a lawyer to read the contract and explain exactly what you are getting into is a good idea. It will be cheap insurance to protect yourself.

Lynn Byrne specializes in Ormond Beach Homes for Sale. Lots more information can be found at Lynn's Daytona Beach Real Estate Blog.