To be an investment or not to be...

Rendering of the City Center, Las Vegas

Can a condo hotel, legally, be classified as an investment? This is a topic that has been written about, discussed and disputed since the inception of the condo hotel model. The short answer is, no. The Securities and Exchange Commission (SEC) does not permit developers or realtors to sell condo hotels as investments. (That's not to say this hasn't happened.) They are sold simply as vacation homes and a "lifestyle," and no income projections can be provided. Nonetheless, many buyers are interested in the investment potential of condo hotels. Some of the factors they take into consideration are:

* Rent Revenue: Condo hotel units will produce rent revenue. That revenue can partially or completely offset the costs of owning and maintaining the vacation home. If the buyer can cover their upkeep and mortgage costs, they are in effect, maintaining an investment. As time goes on, their equity will build, so not only will they have a great vacation home in the here and now, but a sizable payout later.

* Location, location, location. Appreciation potential: Most condo hotels are located in areas that have seen the highest appreciation rates such as South Florida, Orlando and Las Vegas. Why not own a tasty piece of the American pie?

* Diminished supply of available land: Again. Location, Location... Desirable locations to build are few and a dwindling supply of available land in key markets, particularly sites on the ocean in Florida and on the Strip in Las Vegas, help ensure that condo hotels, like other types of real estate built in these locales, see significant capital appreciation. Once the economic forecast turns, expect even higher returns on these investments in the future.

* Real estate as a stock market alternative: Many people seek to diversify their financial holdings, combining stock market investments with real estate holdings.