A popular option for those who want to get involved in luxury real estate is condo hotels. Condo hotels essentially allow consumers to buy (and then later rent, if they wish) condominium units at their hotel. As with any real estate alternative, including destination clubs and private residence clubs, investing in a condo hotel requires a lot of consideration. Helium Report spoke with Bob Waun, CEO of Vacation Finance, and gathered the following suggestions on what to consider regarding a condo hotel investment:

1. Condo hotel loans are not salable to Freddie Mac or Fannie Mae and therefore carry slightly higher rates and stricter loan qualification terms.
2. Condo hotels are both commercial and residential property, and so they are both a second home and investment property. This makes them unique in the world of real estate.
3. The condo hotel concept is not new. It is decades old, and has recently reemerged in many vacation home markets.
4. Condo hotel units by definition should produce income; buyers should consider this income as an offset to the expense of owning a second home.
5. There may be additional tax benefits of condo hotels over a traditional condo, as the furniture, fixture and equipment are included in the sales price. Get your tax preparer’s opinion about your purchase.
6. Hotels produce income in-season at higher rates than at low-season. Cash flow is not consistent, and condo hotel owners should budget accordingly. Interest-only loans help consumers control cash flow.
7. SEC rules restrict developers from any discussion about potential income a condo hotel may or may not produce. This leaves a void of data for the consumer, and the consumer should do their own due diligence. Lenders do not want to be involved in projects that are selling ‘income potential’. The right consumer is a lifestyle-seeking buyer.
8. Condo hotel association dues typically include reserves for replacement of furnishing and repairs. These reserves are important to future increases in expenses.
9. Great hotels typically exist in “rare-air” locations. Location, location, location applies to condo hotels.
10. Investing in a condo hotel (or any kind of real estate) takes careful consideration, and it is advisable to consult a with a financial adviser.

What kind of costs and advantages will consumers incur through a condo hotel purchase? See Helium Report’s continuing Guide to Condo Hotels to find out:

• Part 1: Guide to Condo Hotels
• Part 2: Financial Analysis
• Part 3: Brands and Projects

More information and useful links about financing is at www.vacation-finance.com.