Condotel lending is available now, but is this the right choice for you?
While they bring potential profits and some interesting appeal to your portfolio, they can be risky and are not for investors who want complete, unhindered control of the unit. Regardless, they have many benefits, so let’s explore the top five reasons to own a condotel property. But first, let’s make sure we understand exactly what they are.
What is a Condotel?
Condotels, also called “condo hotels,” (and sometimes spelled “condo tels”) are essentially a combination of condominium buildings and hotels. (Could you have guessed by the name?) They are basically condo buildings, where the individual units are owned separately, but the facility as a whole is operated like a hotel, with guests paying to stay in the rooms for a short period.
As the owner, you have the right to use the property when you need it, but when you are not staying in the property it is rented to the general public, just like a hotel room.
Top 6 Benefits of Owning Condotels as Investment Property
1. Monthly Cash Flow
Some investments pay off annually, some only pay when you finally liquidate the assets. But with a condotel, you are receiving a monthly income that increases your overall cash flow and gives greater flexibility and liquidity to your portfolio. If you own numerous properties and have a portfolio worth upwards of millions of dollars, yet consistently find yourself to be cash poor, a condotel could be a reliable solution.
With a condotel, your small yet valuable property is available for rent whenever you are not using it, which means you can expect a decent income whenever you are away. Of course, the property is only available for rent, and may not always be earning, but you can reasonably expect a consistent income from these properties, enhancing your cash flow and improving your portfolio.
2. Earn Income Utilizing Brand Equity from Major Players in Hotel Industry
While this is not the case with every condotel, there is the real chance that you could take advantage of the brand equity created by some of the largest names in the hotel industry. By purchasing a condotel property in a major hotel chain, you are essentially partnering with an established and respected name in the industry. This can help bring greater consistency to your portfolio. These major companies are popular and successful for a reason, so you could put their good name to work for your income.
3. Staff and Management Handle Many Tasks
Owning traditional rental properties, including single-family homes, duplexes, and multiplexes, can be time consuming, frustrating, and, because of repairs and maintenance, a potential drain on your potential profit. With condotels, however, many of the daily responsibilities are handled by staff. This depends on the specific facility where you purchase, but staff could very well handle daily hotel amenities, housekeeping, marketing, customer-service costs, bookkeeping, operational details, and administrative expenses.
Some will even furnish the unit or negotiate this expense, allowing you to save even more on your investment.
4. Perfect for Investors (and their Families) Who Love Activities
Many condotel investment opportunities are found in resort areas, where skiing, beaches, and other attractions are a short walk away. In some cases, they may even be located right in the hotel facility.
For example, certain condtel loans are available for specific properties in resort areas such as Lake Tahoe, Aspen, Colorado, and Sun Valley Idaho. Many people dream of owning a vacation property in these areas, but with a condotel you can own a property in one of these fantastic locations and enjoy a steady income from the properties. Because these properties are in high-demand areas, you can also reasonably expect a consistent income.
5. Generally Less Expensive Than a Vacation Home
The price tag for a vacation home in a popular resort area can be astronomical. But with a condotel, you can purchase a property that is available for your personal use and it can come with a much lower price tag. This is a general statement, and there are some condotels that are more expensive than some stand-alone vacation properties, but generally you will find prices to be lower.
6. Purchases Can Be Made with Financing
Another reason why these are so useful for your portfolio is that they can be purchased using a loan, meaning you don’t have to liquidate assets of consume a large percentage of your cash just to employ these properties.
With other investment, you may not be able to make such a significant purchase with financing, but this is possible when you work with the right lender. Many investors prefer this method, but it requires a disciplined approach; be sure to talk with your lending agent and financial advisors to see if this is right for you. High-quality condotel lending can make these properties more attractive.
Important Note: Condotel Lending and Ownership is Not For ALL Investors
It’s important to note that a condotel may not be the appropriate choice for everyone, and there are drawbacks to using this investment strategy. For one, condotels may come with high maintenance and cleaning costs; while having these services handled by another party is convenient, it can come at a high price.
There may also be the need for special insurance, and there could be additional charges based on the specifics of the property. Also, pricing will usually be based on the tourism market, not on the real estate market. (They are indirectly connected, but are generally separate.) Also, you could be limited to the number of days these properties are available to you, and terms could dictate that the property remain available during peak tourism times, such as skiing season for condotels near ski mountains or summers for properties near beaches.
Condotel Lending is Available Today!
If you are interested in taking advantage of condotel lending to enhance your investment portfolio, contact our staff today.
We can help you choose the right loan for your purchase, and we’ll do what it takes to process your loan quickly so you can make the purchase and start enjoying the benefits of a condotel right away.
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Chad and his team was awesome throughout the entire process. They made things easy and smooth, and able to answer any questions at anytime. By far the best experience with a lending team yet. Great job!”