Orlando Condo Hotel Central

What are condo hotels?

A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

What are the benefits of condotels?

 There are many! What most people do is have the management rent the units out for them to defray the costs, and sometimes even creating a positive cash-flow. If you feel like going on vacation, you just call up the management company and let them know that you'll be using your unit on specific dates, and they set it aside so no-one else uses it.

Condotels also have been appreciating in value at rapid rates in the last few years. Many investors have made incredible profits just purchasing and selling these units, which is known as flipping.

And don't forget about the amenities! Think of all those amenities you have when you go to a luxury resort. Many condotels have pools, spas, tennis courts, golf nearby, restaurants, bars, saunas, playgrounds, and more. Keep in mind, however, that different establishments offer different types of amenities and you should research them before assuming that they have everything that you want.

There are usually tax benefits involved as well, but I will recommend talking to someone who studies tax law such as your accountant before making final decisions based on tax savings.

Who buys condo hotels?

Condo hotels fit the bill for several different consumers. Many investors like that the property is centrally managed, as hotel rates are typically higher than long term leases or single family home rental rates, and this gives the investor a better chance to offset monthly condo hotel ownership costs. Many Florida second home buyers are disillusioned with the high cost of second home ownership in central Florida. The double edged blade of high appreciation in central Florida, especially in Orlando, is that although if you already own a vacation home near Disney® the appreciation is making you a happy property investor; if you do not already own an investment or second home property, many of the properties at preconstruction are too expensive and are cost prohibitive. With some condo hotel renovations starting in the high $100's and fully furnished preconstruction condo hotels 1 mile from Disney® from the mid $300's Orlando condo hotels enable the second home buyer realize the dream of seconds home ownership in central Florida at a price that allows you to actually go on vacation to Orlando! Condo-hotels have tremendous appeal as investments in today's market due to very low interest rates and a risky stock market that has investors looking for possibly safer alternatives.

Why haven't I heard of condo-hotels?


There is every chance that if you go on vacation a lot you might have stayed in a condo hotel. Condo-hotels are typically large, high-rise, luxury hotel buildings operated by big names such as Ritz-Carlton, Sheraton Hiatt, Hilton, Trump and Rosewood.

Each condo-hotel unit is sold to individual investors who may use their unit for a specified amount of time, and when not used the investor has the option of placing it into the in-house rental program. Rental revenue is shared with the operator and helps defray the unit owner's expenses.

 

How do condo-hotels differ from timeshares?


This is not a timeshare. You possess whole-ownership. At a timeshare vacation destination you are a very small owner with only a right to a use. When you own a condo hotel you are the only owner and receive an actual deed to your property.

How much do condotels cost?

Condotels have a vast range in price. This is another benefit of condotel investments. No matter what your price range is, there is something out there for almost anyone. Most range between $200,000 and $500,000, but our brokerage have purchased them for as low as $145,000. If you're a big spender, the can cost millions for a single unit, so regardless of your price range, there should be something for you.

Who are the SEC and how do they affect condo hotel sales?

Please click on this link to learn why Realtors cannot sell you a condo hotel based on potential income.

How do Condo-Hotels Work?

By no means a novelty, the condo-hotel model is showing resurgence due to rising condo prices and the current "Midas Touch" perception of residential real estate. 

The most successful condo-hotels are those built as hotels first and then as condominiums second, as public space is needed to sell hotel rooms, while unit owners share in the popularity and success of the lodging operation. Alternatively, many deals have floundered where the developer built the tower as a condominium, and later sought to create a rental program and piece together the public space and amenities.

For a hotel to operate smoothly when a different person owns each unit, it is imperative for a management company to have a contract with the owners. The management company can be either the developer of the property, or a group directly related to the developer. However, more increasingly the management company is a third party hotel operator, such as Hilton, Hyatt or Four Seasons, among others, that the developer and unit owners agree should manage the guest rooms for the unit owners, and the facilities (such as food & beverage outlets, recreational amenities and meeting space).

The industry is currently shifting its strategy toward the outright sale of the hotel management opportunity to nationally affiliated hotel companies, operating these properties similarly to that of a conventional hotel operation. This has been achieved by separately deeding all of the hotel-like features mentioned earlier as individual condominium units; these commercial condos are then sold to a hotel operating company. Along with rental agreements from the individual condo buyers, this allows the hotel operator to effectively manage the property as a hotel. 

In order to place a unit in a rental pool program, a management and rental agreement is first signed between the unit owner and the hotel management company. This agreement provides for a number of variables, primarily:

  • A portion of the revenues received from the nightly sales of rental pool units flows through to the condo owners, usually a 50-50 split, after a 10% Service Fee. 
  • The hotel management company/operator retains the remaining portion of the rental revenue stream. 
  • A Usage Agreement is implemented between condo owners and the operator, providing for the implementation of an FF&E (Furniture, Fixture & Equipment) reserve that is maintained by the hotel company. 
  • The FF&E furnishing packages within rental pool condos need to conform to certain standards. Failure to comply with such standards may either require immediate refurbishment at the unit owners’ expense, or the expulsion of non-conforming condos from the rental pool. 

Responsibility for the maintenance and repairs of common space is allocated among condominium unit owners, based on their pro-rata shares. A Homeowners’ Association (HOA) is usually set up to retain ownership of such areas and oversee the collection of dues from unit owners. These dues typically cover reserves, common area maintenance, and property insurance and utilities expenses. Property taxes are usually paid for directly by the condo owners, and the hotel manager pays for its costs of operations, such as salaries and other direct hotel expenses.

Additional particulars pertaining to the successful operation of condo-hotels are highlighted as follows:

  • Unit owners could be restricted to a maximum of eight weeks of personal use during the year. 
  • Rental contracts renewable on an annual basis. 
  • In order to guarantee availability for owners, a 30-day notice of intent to occupy a unit must be given by individual owners. 
  • Monthly statements showing a detailed breakdown of all unit activity and owner's account activity should be issued to unit owners. 
  • To ensure an equal distribution of bookings of the units in the rental program, a rotational booking program should be used. 
  • If there is an unusual or extraordinary event, the hotel guest should be charged for damage to the owner's unit. Normal wear and tear is to be anticipated and should be the responsibility of the unit owner and replacements should be made from the unit's reserve account.

Different Perspectives

The Condo Owner

For the condo buyer, these types of developments can offer enhanced financial returns when owners choose to place their units in a rental pool. Individual owners usually can put their units in the hotel-room rental pool while they're not using them and get a portion of the proceeds. Better yet, they get access to the same amenities and services as hotel guests. 

By capitalizing on a hotel’s national affiliation, reservation system, brand recognition and management expertise, unit owners are more likely to receive a higher level of rental income through a rental pool agreement with a recognized professional operator, despite having to share a portion of their units’ revenues. Due to the high demand for accommodation near the theme parks, many hotels are dropping their branding as the hotels are showing good occupancy without the extra cost of paying for a brand name.

The Condo Developer 

The condo-hotel structure offers a number of potential benefits for the developer. First, it provides a method to help finance the development of hotels; the sale of units gives the developer an assured source of revenue to repay a portion of the construction loan upon the completion of the hotel, and the closing on the sale of the units. Additionally, a developer can benefit by marketing the hotel amenities to a buyer.

Developers of successful projects generally can obtain construction financing without reaching the lending threshold of 50% presales for a planned condominium development (along with a 20% down payment on the loan amount). Developers of condo-hotel projects are attracted to this development approach due to their ability to quickly "monetize" the management function of the property. That is, the sale of the hotel management opportunity becomes similar to another condo unit that can be sold for immediate profit. If the hotel management opportunity is sold upfront during the sell-out phase of the residential condominiums, the developer may be able to receive rental revenues from the completed (and sometimes unsold) units being rented to hotel guests.

In developing this tier of property in the U.S., it is important to note the potential for securities law issues to arise out of the sale of condo-hotel units. The sales of condominiums may be deemed to be the sales of securities if certain conditions stipulated by the SEC exist at the time of sale. However, in order to avoid coming under the scrutiny of any securities agencies, or being obligated to register under the Securities Act of 1933 (both costly and time consuming), developers may take several measures while planning condo-hotel projects.

Conclusion

Although still unknown how units will sell a second or third time condo-hotels currently offer a means to finance construction of new properties. There is little doubt that condo-hotels are an intriguing approach to the development of lodging properties, and as its use becomes more common in the market, levels of understanding by both the lodging industry and the condo-buying arena are projected to increase.


Q - How do I get started?

A - Contact us so that we can discuss what your goals are and how we can get you ready to purchase your second home or other investment properties in Florida.

Q – Where do I go for financing?

A – We have several really good and competitive Lenders we will introduce you to. These Lenders will help you work with the equity you may have in your current home and help you finance your second home or investment property in whatever way is best for you.

Q – Are the Lenders you will refer to me competitive with programs and rates?

A – We will only use Lenders that stay competitive. We do not benefit from the Lending process, therefore, we will only refer you to Lenders that are prepared to put you on the top of their list of priority clients.

- By the same token, some of our builders use “preferred lenders” and you may be required to go through them in order to benefit from the incentives they may be offering for your purchase. We will advise you every step of the way.

Q – What kinds of programs are available to Buyers?

A – Of course, everything depends on the quality of credit you have. With that in mind,you can obtain 100% financing for a second home if you have an excellent credit history. We also have 5%, 10% and 20% down financing if your credit is less than perfect. There are adjustable rates, interest only programs and the traditional amortization products available to you.

Q – Can I purchase more than one property?

A – Depending on your goals, we can accommodate any type of strategy your may want to follow.

Q – I have property that I own elsewhere and would like to do a 1031 Exchange. Can you help me?

A – We are fully knowledgeable and experienced in the 1031 Exchange process and we are prepared to assist you with your trade for new properties.

Q – I have a Self-Directed, Roth IRA, is it true I can use funds from that to make a purchase?

A – Yes. Please contact us for more information.

Q – How will I manage a property if I live out of state?

A – Before we work a particular area, development, or county, we prepare by arranging for good Property Management. The Property Manager will arrange to get and keep your property rented, take care of maintenance issues and send you your monthly income check so you can pay your mortgage.

Q – Why would I want to purchase in Florida ? Will it make sense to me?

A – Florida is still affordable. Florida is appreciating steadily and rapidly. Florida 's economy and population is growing. All things considered, a purchase now, in Florida, will help you grow your retirement fund, allow you to increase your net-worth and help you make an eventual move to the Sunshine State if that is part of your goals.

Q – What is the easiest method to make contact with an agent?

A - You may choose to call us but, if you e-mail us and take the time to explain Who? What? Where? When? And Why? We can respond to you quickly and efficiently.


Note: All properties are on a first come, first serve basis. You should contact us immediately so that we can put you and your needs on track quickly.
 


Hotels turn in strong performance



Survey ranks Orlando market high in key categories

By Jerry W. Jackson | Sentinel Staff Writer
Posted February 26, 2005


Orlando's hot hotel market was at or near the top nationwide in a number of key growth categories in 2004 -- and it might do even better in 2005, a representative of one of the nation's leading industry research firms said Friday.

The Orlando area's average hotel occupancy rate last year, for example, was the fifth best in the country at 70.7 percent, well above the national average of 63.1 percent, said Brian Ferguson, vice president for marketing and strategy with Smith Travel Research, based near Nashville, Tenn.

The rate of growth in Orlando's average occupancy was a sizzling 12.8 percent for the year, leading the country by a wide margin. "It's a great number," Ferguson said during the monthly meeting of the Central Florida Hotel & Lodging Association.

In terms of room rates, Orlando was in the middle of the pack among the top 25 markets, averaging $87.78 for the year. That was only slightly higher than the national average. But Orlando's 2004 vs. 2003 rate of growth in the category -- 3.8 percent -- was good enough to crack the national top 10.

Orlando should do even better at boosting room rates in the coming year, he said.

"You should see rates go up more," Ferguson said, because of the lag in group-travel price increases. Orlando has more group travel than many markets, he said, and groups have longer-term contracts that take time to reflect price hikes.

The company does not make specific forecasts for regions, he said, but revenue-per-available room, a key measure of industry health, should rise another 7.1 percent nationwide in 2005, after posting a healthy 7.8 percent increase in 2004.

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