Condo Hotels

Looking at the Bigger Picture

Condo hotels are one of the hottest trends in the real estate market. New properties like Trump and Ritz Carlton are cropping up everywhere – from urban destination to major resorts. New buyers are braving the market and things have been moving quickly.  Though this is undeniably a good investment, sometimes we have to step back and take a moment to look at the bigger picture.

There is an enthusiasm about the concept of condo hotels. More people recognized its potential and therefore created a demand for more inventories.  The average buyer is between 35-50 years old, from all over the U.S., some are from Europe and South America.  Majority want condo hotels primarily as investments, focusing on the potential for its appreciation with the advantage of hassle-free ownership. The ability to actually utilize the unit as a vacation residence is also important but only secondary to their primary goal of investment diversification.

Every property on the market has sold out in its pre-construction phase. Most of these are high-rise buildings by mega hotel brands with an average of 200-500 condo hotel units, some even in excess of over 1,000 units.  The speed of sell out is often surprising to both buyers and developers themselves. The MGM Grand Las Vegas, for example, with 576 units was sold out in two months. 

Also a new trend these days is developers buying old existing structures and upgrading them or knocking them down to build a new one in its place.   Some properties are also beginning to crop up inland. Some Condo hotels may not own oceanfront views; but they may be within walking distance of a beach. And because they're not beachfront properties, they tend to be priced economically.

A lot of developers take reservations long before they've prepared their purchase contracts. Many of the best condo hotel units are reserved before any money is exchange and before the spade of ground has turned over. Those early buyers are seeing more appreciation on their investments. Like anything in demand, prices keep going up. Developers often raise prices 3 to 5 times until they sell out.

Discounting prices to begin the selling process used to be a common practice, but because the demand is so great, this is no longer done. Sometimes, however, price adjustments are made at the very end of the sellout when developers want to end their sale and move on to the next project. With regard to price, early on in its first pre-construction offering is the best time to buy condo hotel units.

Most condo hotels are 4-5 star quality. It's getting easier to get financing for condo hotel units. Banks and mortgage companies now recognize the viability and value of these properties. Real estate is about location. Good locations mean significant appreciation.

It's safest to go with mega companies like Best Western, Four Seasons, Starwood, Hilton, Rosewood, Trump, Setai and Ritz Carlton are excellent examples. Compare the rental sharing program and the management companies. You will feel more comfortable in investing your money in condo hotels with experienced and top-notch management company versus an independent operator.

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