Condo Hotels as Investments in Fort Lauderdale and Miami

By: Denise Stewart & Melissa Stewart

If you are searching for a Condo Hotel to buy in Fort Lauderdale or Miami, you may be wondering if they are good investments, or are there other reasons to purchase a condo hotel..

Think about the concept, and could there be any reasons why it is not a win-win situation, especially if the condo hotel is in a great area like Miami Beach or Fort Lauderdale Beach. Most Condo Hotels are built by developers that specialize in vacation investments, so they understand the vacation concept, and will complete an amenity package that is comensurate with the standards of a quality hotel, meaning restaurant and spa services will be available. So if you can buy a Condo Hotel, use it for a month with family and friends, and rent it out for the remaining 11 months, what's the catch?

This is a situation where the Devil is in the Details, and you need to pay attention to the experience and track record of the Hotel Operator, the costs and expenses of operation, as well as the price you are paying for the Condo Hotel. As a general rule is that a condo hotel room must earn $1 per night for every $1,000 it costs to buy or build the condo. This means if a condo hotel costs $500,000, then the condo should rent for $500 per night, on average, and be occupied 75% of the time. Generally the operators of the Condo Hotels in South Florida will have a sliding scale as far as the expenses are concerned, buy you should expect to receive around 50% of the rental income from the Condo Hotel unit. Typically the operators of the Condo Hotel may have a seperate Hotel operation which may compete with the Condos being rented, so you may want to consider this as an issue if you are comparing other buildings. Remember from the receipts you are going to have to pay the carrying costs of the Condo Hotel which includes the taxes, insurance,  HOA charges, and possibly the utilities and cable charges. The HOA charges for a Condo Hotel are relatively high only because of the amount of amenities that are in the project, and the other charges that are being absorbed by the Association.

In the Fort Lauderdale area for example there are several Condo Hotels for you to chooses from, with a wide variety of amenities. The W Fort Lauderdale Hotel & Residences may be the top of the line because of the high standards it has set, which equated into the higher rental rates for the Investors. These are some of the features:

RESIDENCE FEATURES

Magnificent 9-foot floor-to-ceiling windows
Atlantic Ocean and Intracoastal
Waterway views
Sliding glass doors onto spacious balconies
Fully finished living and dining areas
Entertainment system
KITCHEN AND DINING
Fully-integrated kitchens
Italian designed cabinetry
Polished designer stone counter tops
Deluxe side-by-side refrigerator and freezer
with ice maker
Dishwasher
Flat range stove with gourmet wall-oven
Built-in microwave
Under-mounted stainless steel sink
Dining table with seating for four
Washer and dryer
MASTER BEDROOM®
Signature W Hotels® bed
Premium Audio device
Plush seating
Up to 50” LCD TV 

BUILDING AMENITIES
BEACHFRONT – 315 linear feet of designated white sandy beach
WET EAST® – heated swimming pool oasis with endless oceanfront views
WET WEST® - Secluded Pool Oasis
CABANAS – Book a private cabana and order treats from the WET® Bar
FIT CENTER – The perfect spot to inspire a workout
BLISS® SPA – Pamper the mind and body in our full-service spa
STEAK 954 – Steven Starr gourmet oceanfront restaurant
LIVING ROOM – Ocean view lounge for cocktails, bites and socializing

As you can see, if you are going to be in competition for Condo Hotel Guests, you must be willing to compete with the amenity package being offered.

There are many that feel that Condo Hotels are not good investments. 

Leonard Brown of Zillow recently posted this in a response to the question "Are Condo-Hotels good Investments?";  Generally speaking, condo-hotel purchases are not good investments. Because you can’t predict future prices, it’s hard to say whether condo-hotels behave like other real estate investments in terms of appreciation. Instead, you should focus on what you can predict: cash flows....Additionally, there are tons of financial risks with condo-hotel investments. First, there are risks when buying into an HOA community. You also have the risks that come with owning part of a hotel such as a downturn in the economy or poor management of the property. Lastly, the allocation of expenses between the condo-hotel units and other portions of the property – such as a developer-owned hotel or retail space – presents a risk.

The bottom line is that the first thing you should consider is whether you like the Condo Hotel for you and your family as a perk for ownership. Then look at the financial details of ownership and decide if the Condo Hotel performs at 75% of its projections, will this be satisfactory to you as an investment. You will really need to do some hoework, or better yet ask a good Realto to do some comparisons for you.

For more information about condo hotels in the South Florida Market, contact Denise Stewart at 866 783 6011 or  denise@condo.net