At a condo resort, a buyer creates a fee simple purchase of a deeded condominium unit/guestroom. When not inhabiting the space, the proprietor may make the unit available to guests at the hotel via a leasing direction or leaseback program. Any area revenue generated via the application is shared between the unit owner and the developer/managing spouse. This scenario provides a host of tangible benefits for the condominium owner, including a deed into a physical area, access to all resort amenities and the capability to benefit from a 1031 tax-deferred exchange. Condo hotels differ from other vacation home models in many different ways.
The condo hotel concept has numerous benefits over other vacation models, such as higher product consistency, fewer ownership struggles and hassle-free leasing opportunities.
Seldom-used holiday homes take some time and cash to oversee and maintain. With a condominium resort, you receive the services and flexibility with no time commitment. The onsite management firm manages all maintenance, finds tenants and takes care of renters’ needs on-site.
- A condo hotel unit is an asset that you may sell at any time, and, you keep 100% of the profits.
- Standardized furniture packages are often incorporated into the price, or at minimum, your turnkey unit should look like all the other units in the hotel
- Units rented to hotel guests suffer wear and tear. Expect special Furniture, Fixture, and Equipment (FF&E) assessments to replace worn carpet, drapes, furniture, etc..
- The rental program allows condo hotel owners to earn rental income and provides access to hotel services and amenities
- Potential for tax breaks associated with mortgages and depreciation.
- Maintenance free ownership because property managers handle all maintenance.
- Ability to take advantage of a 1031 tax-deferred exchange.
- To assure room availability for visitors and tourism, local governments may limit the amount of time owners may use their unit.
- Financing can be more costly than for a primary residence – usually +1%.
- If the owner wants to use the unit, they should notify the hotel in advance.
- Owner should pay additional fees if they want to utilize housekeeping and other services.
- Income from rental may fluctuate if there is a decline in travel, desirability of the unit, or based on hotel rental rates.
Condo Hotel Owners may need to purchase additional insurance riders to protect against liability claims and damage or loss. Know more Watch This Video
Condo Hotel Owners will pay monthly Condominium Association Fee’s
Should a condo hotel owner decide to participate in a rental agreement, they should determine if the property has a static “hotel room” inventory. Commercial unit”rental preferences” over privately owned units could influence rental opportunities, assess rental agreement language to guarantee just and equitable distribution of rooms one of both industrial hotel rooms and participating privately owned condo hotel units.