Who's Buying Condo Hotels and Why

Q: I'm curious as to who is interested in a condo hotel?

A: We find that a majority of our buyers are 40 up to 65 years of age. They make up the majority of the baby boomer market, born before 1964.

There are 75 million U.S. baby boomers that will retire in the next 15 years. They are just now hitting their financial peaks in their respective jobs and are also inheriting monies from their parents who are passing on.

They are in a position to travel more than ever, and owning a second home ensures that they will do this and is even a status symbol to some, like owning a fancy car. They are looking to invest in real estate, and don't favor the stock market as they did prior to 9/11, and they love the hassle-free nature of this kind of investment.

Q: Who is not a good prospect for condo hotels?

A: Buyers who are not good candidates for condo hotels are those people who don't like to visit the same place year after year. Or they may have job situations where they can only get away on very short notice. Condo hotels wouldn't work for them because they may not have their unit available to them because it's been rented already to another hotel guest.

Condo hotels are also not a viable opportunity for someone looking for good cash flow. A positive cash flow is icing on the cake, but is not a certainty, and should not be your primary focus in making this type of investment decision. Having a vacation home to enjoy and the potential for long-term appreciation of the real estate are more realistic objectives.

Q: Are condo hotels advantageous just for the luxury-seeking vacationer but not for the shrewd investor?

A: They appeal to all buyers, both second-home buyers and shrewd investors, but each type of buyer may have different expectations and different buying parameters. The second-home buyer wants location, service, amenities, and a respectable franchise to run it. This is a vacation home he may keep for the next 10 years. He is more concerned about the quality of the vacation home, the location and that the revenue will cover all or at least most of his ownership expenses.

The investor buyer wants all that too, but if he can't get in early, and if prices have already increased from the initial offering he may be less motivated to go forward, as this will affect his return on investment. Investor buyers typically want to get in and out of the property as quickly as they can, take their profits and move on to the next deal. For this reason, we encourage investor buyers to subscribe to our Property Alerts so that they can learn about pre-construction buying opportunities when prices are lowest and unit selection is greatest.

Lastly, I do need to make the point that Condo Hotel Center caters to all kinds of buyers, but we tell the "investors" that we, like the developers that we represent, focus on selling the real estate and the lifestyle, not the investment aspects of a deal. We intentionally avoid providing information about the likelihood of cash flows and returns on investments, as that information would be speculation and would violate our agreements with the developers as well as SEC regulations.

The above questions were submitted via e-mail by a visitor to www.CondoHotelCenter.com. The answers were prepared by Joel Greene, a licensed real estate broker with Condo Hotel Center which specializes in the sale of condo hotel units and fractional ownerships in private residence clubs.