No, they are not. Developers are aware that there are potential security law issues that may arise out of the sale of condo-hotel units. In order to avoid coming under the scrutiny of any federal or state securities agencies, developers usually take several simple preventive measures. These include:
1. Refraining from setting rental revenue expectations for prospective buyers. Instead, the developer's emphasis is on the real estate itself as per the marketing material and presentations. The developers avoid raising purchaser's investment expectations because providing anticipated financial information may give the project the appearance of a security.
Therefore, it is best to consider your purchase to be similar to the purchase of a second home or vacation home. If you buy right and choose a desirable building in a good location, there is likely to be appreciation of your investment over the years. Then, as icing on the cake, if you choose not to use your unit, you can receive income from its rental to help defray your ownership costs.
2. Instituting a third-party agent to oversee the sales of condo-hotel units and distribute rental program information.
3. A voluntary rental program participation which permits condo-hotel owners to either rent their units to third parties or to not rent their units at all.
While condo-hotel unit owners can appoint a rental management company of their own to manage the rental of their unit, selecting a manager other than the condo-hotel's management company would likely be impractical in attempting to effectively maximize rental income.
The above question was submitted via e-mail by a visitor to www.condohotelcenter.com. The answer was 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.