Interest is growing rapidly in condotel financing. But while more and more borrowers are considering investing in condotels, many have questions about the entire concept. Below, you can discover answers to some of the most frequently asked questions on condotel loans.
Q: What exactly is a condotel?
A: A condotel is a condo unit which is in a resort. The name is a contraction of “condo hotel.” You can purchase such a unit and stay in it when you are in the area and rent it out when you are away. In many condotels, the same amenities which hotel guests are offered also are extended to those staying in the condotel units.
Q: Why would I buy a condotel?
A: There are two key reasons to consider purchasing a condotel. The first is so that you have a vacation home waiting for you each time you’re in the area. The second is so that you can profit by renting out the unit. For these reasons, a condotel is ideal if you are a seasonal resident or regular vacationer.
Q: What do I need to look for in a condotel lender?
A: Many lenders lack the specialized knowledge which is required for successful condotel financing. Choose one which has plenty of experience with this type of loan and extensive knowledge of the local real estate market and tourism industry.
Q: Can I stay in my own unit?
A: Yes. This is one of the main reasons why many people decide on condotel ownership. When you sign your agreement with the resort, you will discuss which days during the year the unit will be available to rent out. That way, you can set aside certain dates for yourself. Note that you do not actually have to rent out the unit at all. You can choose to stay in it all year, or simply leave it unoccupied for part of the year.
Q: Who rents out the unit? Is it me, or is it the condotel operator?
A: It depends on the agreement that you come to with the resort. If you prefer to manage the marketing and rental of your unit on your own, you may have that option.
But it is usually most effective to permit the resort to handle these tasks for you. This reduces the amount of work involved for you, and also places the responsibility into the hands of someone who has more outreach and experience. This in turn should result in higher revenues for you.
Q: Will the unit ever be empty?
A: Possibly. In some situations, the unit may be vacant because you have decided not to rent it out or stay in it yourself. In other situations, the unit may be up for rent, but may still be unoccupied because there are not any takers.
The best way to reduce this kind of rental downtime is to be highly selective when you’re shopping for a condotel in the first place. Try to invest in a high demand unit in a competitive location. Just be aware that there are no guarantees.
Q: Who pays for taxes and insurance?
A: In most cases, it will be your responsibility to pay for taxes and insurance on your unit.
Q: Who maintains the condotel unit?
A: This also depends on the nature of your agreement with the operator. Normally, the responsibility for basic maintenance and housekeeping falls upon the resort company, not on you. This is one of the key benefits of condotel ownership. Note that there are fees that you must pay for these services.
There is a revenue split (see below) associated with owning a condotel. In circumstances where you decide that you would like a larger portion of that split, you might decide to take on maintenance and housekeeping responsibilities yourself instead.
Q: What percentage of revenue should I expect?
A: That depends on what responsibilities and services both you and the operator decide to take on. In general, the more that the operator is providing you with, the higher the resort’s revenue percentage will be. This is after all only fair.
Q: How do I save money on a condotel?
A: Condotels can be expensive. If you are looking for an opportunity to pay less, consider taking advantage of a pre-construction deal.
Q: Is Florida a good location for a condotel?
A: Definitely. In fact, the Miami area is the largest and most well-established condotel market around. You could not ask for a better location.
Apply for a Condotel Loan in Miami Through Lending Bankers Mortgage
If you think that condotel ownership may be for you, we can help you apply for competitive condotel financing in Miami or the surrounding region.