Frequently Asked Questions (FAQ):
1. In a nutshell, describe the essence of the condotel concept? Condotels are usually large, high rise, luxury hotels operated by big names in the hotel industry such as; Trump, Hilton, Regent Intenational. Four Seasons, Ritz Calton, Bulgari and Le Meridien. Condo-Hotels have condominiums that are sold to individual investors who may use their unit as a vacation home whenever they like. When they are not using their unit, owners have the option of placing it into an organized rental program. Rental revenue which is shared with the operator, helps defray the owner’s expenses.
2. What are the benefits to the condotel buyer/owner? Owners have a luxurious vacation home in a premier location at their disposal. Owners who choose to place their condotel unit in the property’s rental program receive revenue which helps the expenses of ownership. Most condotels offer hassle-free vacation home ownership. The on-site management company takes care of all upkeep, maintenance and interaction with renters. Owners of condotel units have the right to resell the unit at any time. They keep any profits derived from the appreciation. Thus, condotels combine vacation home ownership with investment potential.
3. What is the role of the Condotel Operator? The operator of the rental probram, in exchange for a share of the revenue, markets the units as a hotel, takes reservations, operates the front desk, maintains the property and provides the services hotel guests expect, such as housekeeping, food, and beverage, and concierge.
4. Describe the typical arrangement between the condo hotel buyer and the hotel management company?
Some of the items spelled out in a typical owner agreement include:
- The amount of revenue the condotel owner will receive
- The amount of revenue the hotel management company will receive
- Typical deductions before each of the parties receives their share, including money for a furniture, fixture and equipment reserve
- The financial responsibilites of the condotel owner, which usually include the real estate taxes, insurance, capital improvements and debt service.
- The financial responsibilities of the condo hotel management compancy, which usually include operational expenses like housekeeping, maintenance, front office, administrative and marketing.
- A rental program agreement which outlines the number of days per year and requirements notice for owners regarding use of their condotel units.
5. Can condotel owners rent our their units themselves and keep most or all of the revenue? In most condotel properties, they can, but doing so defeats one of the prime benefits of condotel which is hassle-free ownership. Most owners prefer to have the onsite professional management company find and handle renters. In additiona, owners of condotel are likely to receive a higher level of rental income by participating in the property’s rental program which is administered by a recognized professional operator that can capitalize on the hotel’s global affiliation, its brand name, its sophisticated reservation system and management expertise.
6. What are the keys to a sucessful acquisition of condotel? The essential ingredients to a successful ownership of condotel include the following: good location, an attractive amenity package, a respected developer, a strong brand and good management.
7. Are developers willing to guarantee the rental of the condotel units when not in use by the owners? No, they are not. Developers are aware that potential security law issues can arise out of the sale of condotel units. In order to avoid coming under the scrutiny of any national or local government investment rulings, developers refrain from setting rental revenue expectations from prospective buyers. Instead, the developer’s emphasis is the condotel marketing materials and sales presentations is always on the real estate itself. Generally, it is best to consider a condotel unit purchase to be similar to the purchase of a second home or vacation house. Construct a beautiful building in a good location and there would be an appreciation of the investment over the years. As icing on the cake, owners who choose to participate in the rental program can receive income from its rental to help defray ownership costs.
8. Where are condotels located? Condo-Hotels are typically located in highly desirable areas, often near the ocean, theme parks, golf courses, or in major cities.
9. Are all condotels newly built? There is a mix of condotels that are newly built from the ground up and those that were originally hotels and have been upgraded and converted into condotels. Because land in prime locations is so limited and costly, it is possible that condotels conversions will eventually outpace new construction of condotels.
10. Does it cost extra to purchase a condotel using a real estate broker? No. The price is the same whether you use a Realtor or go direct to the property. The seller (developer) pays all Realtor costs in the form of a comission. In those cases which no Realtor is involved, the developer either keeps the additional revenue or pays a percentage of it to the property’s in-house sales staff.
11. Where are most condotel buyers coming from? Buyers are coming from all over the world. For us Filipinos, we have OCW/OFW as our target market. They like the idea of owning a hazzle-free vacation home in a prime location in the Philippines that can generate revenue when they are nit using it and is likely to appreciate in value over time.
12. Is financing available for purchasing condotel units? Financing for condotel units is not difficult to find. Most banks now are familiar with condotels and recognize them as viable real estate investments. Often the condotel developer itself or the real estate broker can recommend reputable lenders.
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