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Frequently Asked Questions
What is a Condo
Hotel? A condo hotel offers the opportunity to own an
elegant and exquisitely furnished hotel room in some of the most
desirable locations in the world. Since this is a purchase, the
buyer not only gets a deed to the property, allowing the sale or
transfer of the unit, but also tax and real estate appreciation
benefits. When using the unit, the owner has access to all of
the amenities of the hotel. When not in use, the unit can be
available to rent through the hotel's rental program.
What are the major benefits to an owner of a Condo Hotel
unit? Most important is hassle-free ownership. When the unit
owner, his family or friends want to use the unit, they call the
hotel and schedule a visit. While at the hotel, they enjoy all
of the amenities and services of the hotel. When the unit is not
being used, it can be rented through the hotel's rental program with no worry about maintenance and upkeep.
Who manages the hotel and what are their responsibilities?
The hotel is generally managed by a brand-name hotel operator.
This operator not only manages the hotel's rental program, but
also markets the units, takes reservations, operates the front
desk, maintains the property, and provides the services hotel
guests expect, such as housekeeping, food and beverage, spas and
concierge.
Can a condo hotel be financed? Yes, it can. However, it
may not be possible to finance it at the same rate and terms
available for conforming residential property. In general, the
going rate is .5% to 1% higher than a traditional condominium.
This is due to the risk-based pricing associated with the
property type until a true secondary market is established.
Why are Condo Hotel units so difficult to finance? The
number of developments coming online has well outpaced the
institutional lenders that have a desire to fund condo hotel
purchases. These loans are considered "portfolio" in nature, and
will in most cases be held and serviced by the lender who
originated the loan, or a number of loans will be packaged
together and sold to private investors. Since there is a lack of
a true secondary market, many lenders do not actively seek to
originate condo hotel paper.
It is particularly difficult to finance units less than 600
square feet that may or may not have a kitchen. This primarily
affects the conversion market as most of the units are true
hotel rooms and do not have the room for a kitchenette. The
square footage number and kitchen requirement stems from the
older "condominium" guidelines set by Fannie Mae, and many
lenders have not updated their own guidelines to accurately
reflect the unique characteristics of condo hotel properties. As
a result, this is very much a niche loan product.
Can family members and friends use the owners unit? Yes
and no. Some rental programs dictate that only the owners may
use the unit without additional cost or they may charge a
nominal nightly cost to cover housekeeping. Others may charge
friends and family members a discounted rate. Of course, if you
are not in the hotel sponsored rental program, you can use the
unit as you wish.
Will a unit owner always be able to stay in their unit?
Every attempt is made to make sure the unit owner stays in his
room, but in peak periods or on short notice the unit may be
rented. If that is the case the unit owner may be relocated to
another unit, at a discounted rate, and their personal belongings will be
transferred to that unit.
Can a Condo-Hotel be purchased under a corporation or LLC?
Yes, it can with some lenders. Some lenders do have restrictions.
The
unit can be closed in the individual's name and then quitclaimed into
the company or LLC name.
Is it mandatory for the unit owner to be in the hotels rental
program? Sometimes yes, sometimes no. Each development has
different programs. In general, the rental program is voluntary,
with a set amount of days per year the unit can be used.
How is the hotel rental program managed? The rental
program is managed through a special reservation system that
assigns "rotation points" to the units as they are occupied.
This ensures that the units with the least amount of points are
the next to be rented as long as they meet the guests'
requirements.
How does an owner's stay in a personal guest room affect the
rental program? When the unit is being occupied by the
owner, or his/her friends or family, the unit is not included in
the hotel's available inventory.
Are there additional expenses that the unit owner incurs
while staying at the hotel? The unit owner is responsible
for any services used in the hotel such as meals, spa treatments
and housekeeping. However, in many cases, there are special
rates for all the services for owners.
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