What is a condotel?
In searching for a vacation home or investment property you may have come across the term “condotel”. You probably found yourself wondering what this means. In short, a condotel is a condo building that is operated like a hotel with front desk, cleaning service, etc. This can be a wonderful option for you but you need to consider the pros and cons.
Here are the pros:
- Rental income potential – On average condotels have high rental income potential. Before you buy, be sure to ask what their annual occupancy rate is for the unit you are interested in.
- Great vacation home – Usually a condotel has the amenities you want when you are on vacation.
- Potential price appreciation – A condotel is typically in a desirable location, is well maintained and has amenities people look for. Pair this with a strong rental income track record that most condotels have.
- Convenience – You don’t have to deal with marketing or renting your place on your own. Your guests have ease of booking and check in just like most hotels.
- Property maintenance – Typically the management company will keep the grounds, building and common areas well maintained. They will also check your condo periodically and make repairs for you (at an additional charge) to keep your condo in good condition.
Here are the cons:
- Financing – typically a condotel requires at least 20% down and not all banks offer condotel financing. You need to be sure you are dealing with a mortgage broker who has successfully closed condotels or be prepared to pay cash.
- High property management costs – The management company is providing services such as marketing, front desk, housekeeping, etc and this will be reflected in the cost to rent your condo. Be sure to find out all costs associated with using the in house management company to rent your unit.
- Using it personally – You have to reserve your unit, you can’t just show up for the weekend. Depending on the time of year, you may have to plan your trip weeks in advance to be able to use your condo.
- Possible property destruction – Guests may not understand that the units are privately and individually owned, therefore they may not treat your condo with as much respect and care.
- Restrictions – The property management company can dictate what you have to have in your condo down to the furniture. Plus, the usage of the condo might be limited. Some condotel guidelines state that they will not allow it to be your primary residence.
Overall, if you are aware of all of the factors surrounding the purchase of a condotel this can be a very good option for you. If you have any other questions on condotels please CLICK HERE to contact us.