Recently, a friends of yours has been extolling virtues of owning property in a hotel complex. Luxurious weekends and holidays, easy income from total strangers … all that jazz.
It all sounds too good to be true, as you have been burned by so-called easy money schemes before. However, after a bit of research and a couple of hours of sober second thought, it sounds like it might be a great concept after all.
Is investing in a condo with a hotel program a good idea? In this post, we go over some pros and cons that you weigh out before investing in any condo hotel development that you end up hearing about from an overly eager friend…
1) You get to earn rental income from a hotel/vacation property
If there is any time in the lives of the average person where all financial restraint is tossed out the window in favor of their own personal gratification, it is when they are on vacation.
While the rate of a vacation rental condo or hotel room often adds up to a sizable sum, they are plenty of folks out there that are more than happy to pay that price if it means that they get a memorable weekend out of the deal.
When you belong to a hotel program, you can often get revenue sharing deals that as good as 50/50, netting you a significant side income if you buy into certain developments.
2) You have a condo in a stunning hotel complex you can use at any time, for any purpose
While your suite is great for earning some extra cash on the side, it also gives you and your loved ones the ability to enjoy the finer moments in life in style.
Impromptu weekends away with the S.O., unforgettable graduation parties, and epic New Years Eve celebrations are suddenly within reach when you hold an investment in condo hotel program.
With world class amenities and furnishings at your fingertips, it will transform social events in your life in ways you can’t presently imagine.
3) The hotel management team takes care of condo upkeep and tenant relations for you
Without question, one of the biggest headaches of the rookie landlord is dealing with the myriad of problems that come from having to deal with tenants.
When you are an investor in a hotel condo, the facilities team that management employs to keep their assets in tip-top shape will also keep yours in mint condition.
With many years of dealing with guests underneath their collective belts, they will handle the issues that crop up when the human factor comes into play, which allows you to lay back and relax as the dollars roll in.
1) Your condo may not always be available when you want it
One of the biggest issues with hotel condo ownership relates to guest occupancy. You’ll want to use the unit at a moment’s notice, only to find that a guest has booked your room for the weekend. Bummer.
When you are an investor in these programs, it is vital that you stay on top of all future bookings so you’ll know when your suite is available for your own personal use, and so you’ll know when you’ll want to make it unavailable to the public (New Year’s Eve is a night you’ll want to plan for many months in advance).
2) The amount of rental income earned from your suite cannot be guaranteed
When it comes to all types of investments, many potential investors seek some measurement of certainty that they’ll make x amount of dollars from their commitment, only to get told one thing: YMMV (your mileage may vary).
When it comes to a condo with a hotel program, it is the same deal, as different management teams have differing competencies in marketing and sales that result in wildly varying incomes for them and their property investors.
Additionally, geopolitical events can adversely affect tourism in a given region at any time, lowering incomes for everyone involved. This last factor is outside the control of the owner, but it can affect your earning power just the same. As such, it is crucial you plan your finances appropriately so you can weather these storms.
3) Unlike investment real estate, you don’t get to keep all rental income that your unit generates
When you hear of the revenue that can be generated by a condo in a hotel, it’s understandable that you might get excited by the prospect of being able make a pile of cash for yourself in this fashion.
However, it’s also important to realize that the hotel is a significant partner in this transaction, as they assume most of the risk and the responsibility for your unit’s upkeep.
As a result of this, you don’t get to keep all of the income that your condo generates, as at least half of the proceeds goes towards the hotel for maintenance, repairs, utilities and profit taking (they are in this to make money as well, in case you didn’t know). It’s only fair, after all!