The condo hotel marketplace can be a difficult and oftentimes confusing environment to navigate. Here are a few common sense guidelines to help keep you on track through your journey:
When deciding on purchasing a condo hotel:
• Purchase not just to obtain a real estate investment, but for multiple reasons such as personal use, to explore the location and to relish in the superior amenities. Seldom do such properties work as stand alone investments.
• Location, location, location. Find not only an area that attracts you, but also one that will attract others and will likely see real estate rise. Also, search in markets that are strong year round (areas such as New York or Hawaii) and not seasonal (such as Orlando).
• Look not only into the brand of the hotel, but the company that manages it. You’ll want a management company with a proven track record, professional service and high quality, consistent maintenance. In fact, oftentimes, the management company is as important or even more important, than the brand name of the hotel.
• Make sure you’re fully aware of the rental program and the HOA details that are set forth in your agreement. Are they fair, reasonable and productive? Do they allow for easy adjustment and/or termination?
• What is the owner occupancy of the building? How long has it been operating?
• Is every facet of the condo hotel operating efficiently? From housekeeping to monthly invoicing; the system is only as strong as its weakest link.
• Do it for yourself, your friends and your family first. Make the purchase more for vacation than for investment and you’ll be ahead of the game.
Monday, December 29, 2008
Monday, December 22, 2008
The National Association of Condo Hotel Owners
A recently formed organization, NACHO – the National Association of Condo Hotel Owners, has created a unified voice speaking out for the condo hotel owner. NACHO provides informative guides to condo hotel ownership, membership forums, detailed listings of condo hotel opportunities across the United States, calculators, rental program explanations and information about conferences and events relative to the industry. They may also be able to help persuade government regulators to treat the condominium hotel for what it is, a unique hybrid real estate project, rather than for what it is not.
Here’s a statement direct from NACHO : The National Association of Condo Hotel Owners is dedicated to sustaining, promoting and growing the condo hotel industry. Our mission to facilitate the healthy expansion of the “condo hotel” segment through fulfillment of expectations – In Education as “a better than alternative” to vacation ownership, providing unit owners the option to earn back some or all of the cost of ownership. Supporting developer’s efforts toward economically viable business models with sustainable properties. Providing a common voice in an emerging segment for the benefit of its stakeholders. Nurturing “Best Practice” in the segment by honoring those developments who have artfully crafted success through delivery of both lifestyle and stakeholder expectations from development through to the consumer.
You can find out more at www.nacho.us
Here’s a statement direct from NACHO : The National Association of Condo Hotel Owners is dedicated to sustaining, promoting and growing the condo hotel industry. Our mission to facilitate the healthy expansion of the “condo hotel” segment through fulfillment of expectations – In Education as “a better than alternative” to vacation ownership, providing unit owners the option to earn back some or all of the cost of ownership. Supporting developer’s efforts toward economically viable business models with sustainable properties. Providing a common voice in an emerging segment for the benefit of its stakeholders. Nurturing “Best Practice” in the segment by honoring those developments who have artfully crafted success through delivery of both lifestyle and stakeholder expectations from development through to the consumer.
You can find out more at www.nacho.us
Monday, December 15, 2008
Disgruntled Condo Hotel Owners take action
A group of condo hotel owners in Florida are bringing a class action lawsuit against WCI Communities Inc, claiming that the developer sold them condo hotel units at the Singer Island Resort as unregistered securities. These owners claim they bought the units as investments and not primarily for their own use and now want out of their contracts. WCI has no comment except that they intend to vigorously defend themselves against the lawsuit.
Other condo hotel owners at the Trump International Hotel and Tower in Las Vegas are fighting to rent out their own hotel units using their own operator clamoring that Trump takes too much of their rental revenue. The owners are demanding their down payments back and claim they were promised a share of the profits from room rentals. At time of purchase, the owners claim claim they were enticed by talk of high-yield rental returns that would cover mortgage payments and HOA costs. Specifically, they were informed that their rooms would rent as high as $650 a night on weekends, to only then be told the figure would be closer to $240. A Trump spokesman said the company’s rental agreements are competitive with other condo hotel rental management companies in the area.
Article Resources:
Condo-Hotel Buyers
See Investments Sour by Michael Corkery, Sara Lin, and Ruth Simon
From The Wall Street Journal Online
Housing slide hits home for buyers of condo hotel units by Tim O’Reilly at lvbusiness.com
Condo-Hotels Under Pressure By KRISTINA SHEVORY from www.NYTimes.com
Other condo hotel owners at the Trump International Hotel and Tower in Las Vegas are fighting to rent out their own hotel units using their own operator clamoring that Trump takes too much of their rental revenue. The owners are demanding their down payments back and claim they were promised a share of the profits from room rentals. At time of purchase, the owners claim claim they were enticed by talk of high-yield rental returns that would cover mortgage payments and HOA costs. Specifically, they were informed that their rooms would rent as high as $650 a night on weekends, to only then be told the figure would be closer to $240. A Trump spokesman said the company’s rental agreements are competitive with other condo hotel rental management companies in the area.
Article Resources:
Condo-Hotel Buyers
See Investments Sour by Michael Corkery, Sara Lin, and Ruth Simon
From The Wall Street Journal Online
Housing slide hits home for buyers of condo hotel units by Tim O’Reilly at lvbusiness.com
Condo-Hotels Under Pressure By KRISTINA SHEVORY from www.NYTimes.com
The Catch 22 generated by the SEC
When you hear the latest news about condo hotels, you tend to hear a lot about the sky falling and the bottom dropping out as more and more disgruntled owners make their voices heard. Besides real estate trends moving markedly downward and owners worried about souring investments, there’s a plague of mistrust and argument over exactly what transpired between purchaser and developer in the first place. Owners are not seeing the return on investment that they claim the developer promised, room occupancy rates are lower, HOA associations are failing: how did we get here?
A good starting point to that answer is: The SEC.
Ironically, the same procedures that the government enacted to protect real estate transactions have become so obtrusive, complicated and expensive, that it’s through the very avoidance of becoming labeled such security, that problems arise.
A condo hotel is not subject to SEC regulation, which leaves purchasers and developers to rely upon non-binding “no action” letters and the 1973 SEC Release #33-5347 that merely provide guidelines to avoid being labeled a security. Under these guidelines, developers cannot advertise that a profit can be made, impose restrictions on the use of the unit, discuss the terms of the rental agreements until after the purchase has been made, make the rental program mandatory or even allow the owners to participate in a pooling of their units.
Of course, catch-22’s abound from the simple fact that the purchaser (unless obscenely wealthy) is more than likely purchasing the unit for both personal use and investment. (And isn’t investment an inherent motivation of acquiring real estate in the first place?) Add to this a hungry developer who now can take advantage of potential purchasers by hiding behind these SEC avoidance guidelines and instead say, “You’ll make money, I can’t tell you how much, just sign on the dotted line.”
Which leaves us with 2 simple questions: Are the SEC registration avoidance requirements actually preventing disclosures that would help prospective buyers and thus limit future disputes and claims?
And, given the substantial price of most condo hotel units, aren’t such purchasers inherently intelligent and economically savvy individuals, who, if they were presented with such disclosures before the transaction, could make informed decisions on their own?
Article Resources:
Government Regulations and Condominium Hotels: Another Case of an Unwelcome Guest? By James M. Norman, www.hklaw.com
Condo-Hotel Owners in Uproar by Sharon Vigoroso at www.sherpareport.com.
A good starting point to that answer is: The SEC.
Ironically, the same procedures that the government enacted to protect real estate transactions have become so obtrusive, complicated and expensive, that it’s through the very avoidance of becoming labeled such security, that problems arise.
A condo hotel is not subject to SEC regulation, which leaves purchasers and developers to rely upon non-binding “no action” letters and the 1973 SEC Release #33-5347 that merely provide guidelines to avoid being labeled a security. Under these guidelines, developers cannot advertise that a profit can be made, impose restrictions on the use of the unit, discuss the terms of the rental agreements until after the purchase has been made, make the rental program mandatory or even allow the owners to participate in a pooling of their units.
Of course, catch-22’s abound from the simple fact that the purchaser (unless obscenely wealthy) is more than likely purchasing the unit for both personal use and investment. (And isn’t investment an inherent motivation of acquiring real estate in the first place?) Add to this a hungry developer who now can take advantage of potential purchasers by hiding behind these SEC avoidance guidelines and instead say, “You’ll make money, I can’t tell you how much, just sign on the dotted line.”
Which leaves us with 2 simple questions: Are the SEC registration avoidance requirements actually preventing disclosures that would help prospective buyers and thus limit future disputes and claims?
And, given the substantial price of most condo hotel units, aren’t such purchasers inherently intelligent and economically savvy individuals, who, if they were presented with such disclosures before the transaction, could make informed decisions on their own?
Article Resources:
Government Regulations and Condominium Hotels: Another Case of an Unwelcome Guest? By James M. Norman, www.hklaw.com
Condo-Hotel Owners in Uproar by Sharon Vigoroso at www.sherpareport.com.
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