Anyone know anything about Condo-tels?

tlbbOctober 13, 2009

I'm looking for a small condo at the Jersey shore and I'm seeing a lot of hotel/motel conversions. Some are nicer than others but I can't seem to get a succinct answer as to the difference between a condominium and a condo-tel. Anyone have any info they can share with me? Thanks in advance.

tlbb

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bethesdamadman

A condotel operates as both a condominium and a hotel. You own your unit and can live in it if you want, or you can turn it over to the management company when it is vacant and allow them to rent it out for you on a nightly basis.

The condotels that I am familiar with in Las Vegas and Miami were purchased by either investors or people purchasing vacation homes and looking for some income to offset the cost of the units.

A lot of these condotels were built during the height of the housing boom and have proven to be utter disasters for investors. For example, MGM and Turnberry built a condotel called Signature Residences in Las Vegas which are connected to the MGM Grand and run by MGM. The studio units sold for between $500k and $800k in 2005 and 2006. They are now going for $150k and the rental income from the units usually isn't even enough to cover the monthly fees, much less the mortgage.

And speaking of mortgages, it is my understanding that financing is no longer available for condotels - at least those in Vegas. Purchasers must pay cash.

    Bookmark   October 13, 2009 at 10:32AM
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tlbb

Thanks bethesda. The places I'm looking at are converted motels. An example:

1 bed/1 bath
50 ft. to the beach
35 unit motel conversion (2005)
No on-site management.
Currently has 4 units for sale (2 of which are short sales)
375 sq. ft.
Assoc. fees $175/mo.
Sold in 2005 for over 200k
Priced in the 130's.

What makes this such a risky purchase? How is it different from a regular condominium?

tlbb

    Bookmark   October 13, 2009 at 11:53AM
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lyfia

Does it have a kitchen?

    Bookmark   October 13, 2009 at 12:37PM
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tlbb

Yes, lyfia. The kitchen has apartment sized appliances, although some owners have replaced them with full-sized.

    Bookmark   October 13, 2009 at 12:40PM
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sweeby

"What makes this such a risky purchase? How is it different from a regular condominium?"

No on-site management.

This is huge. So when a pipe bursts, WHO is going to be responsible? If it's in your unit, sure, YOU might be willing to be, but what if it's your upstairs neighbor? OK - Again, you might be willing to handle it. But what if it's upstairs three units down, and the owner isn't around? And when the owner is found, they're short on cash and can't fix it right away? Which causes mold, damage to other units and visible deterioration of the entire property...

And who is likely to live in a 375 SF 1/1 full time? I'll suggest it's going to be *mostly* people who are too young to know about home maintenance, too old to do it themselves well, or too broke to pay to have it done right. Or weekenders who have to be tracked down, may not want to be bothered, etc.

Sorry, but it sounds like a money pit to me...

    Bookmark   October 13, 2009 at 12:42PM
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tlbb

Aren't there a lot of condo complexes with no on-site management?

    Bookmark   October 13, 2009 at 2:37PM
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cocontom

It's a risky purchase because it's a hotel room. Sure, you own it, but that doesn't change the fact that it's just a hotel room- not even a large one, just roughly 15x25- so probably a 15x15 bedroom and a 10x15 kitchen and bathroom area.

Add to that the $175/month for maintenance- do you already spend $2100 per year on hotels (remember, this is independent of the mortgage).

    Bookmark   October 13, 2009 at 3:18PM
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tlbb

Hi cocontom.

Actually, we do spend about that much a year to stay at the beach. I guess my question is really what the difference is between a staight condo and a condo-tel. A lot of these hotel conversions don't have on-site management or rental pools, but the banks still classify them as condo-tels. There just doesn't seem to be a clear definition.

    Bookmark   October 13, 2009 at 10:29PM
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Happykate

Also search 'motel-ominium', or some variation of that spelling.

    Bookmark   October 14, 2009 at 9:58PM
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pamghatten

Condo "conversions" are totally different than Condotels.

Any conversion usually needs to be totally converted over to all condo units (and all condo legal documents created and filed) before you will be able to get a mortgage, and there can be little to no commercial use of the space.

Condotels are condo projects where there is a reception desk and people can rent a condo for a short stay ... these places also usually have condo units that people purchase and live in, adn other commercial space. These types of projects are not able to be mortgaged under normal mortgage programs. You would probably have to find a small local lender that would be willing to put a mortgage on these.

    Bookmark   October 15, 2009 at 12:11PM
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tlbb

Yes, pamghatten. I think it happens before the actual conversion. That explains why some places are classified as Condotels even though there is no reception desk or on-site management.

    Bookmark   October 16, 2009 at 9:27AM
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pamghatten

Conversions - from a mortgage perspective, are apartment buildings or hotels that are turned into legal condos units.

Condotels are condo units that are rented out.

Two different definitions.

    Bookmark   October 16, 2009 at 1:05PM
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