As the pandemic settles, and the vaccine promises considerable recovery opportunities, spotting opportunity becomes critical. Knowing how to “ride the wave” can make a world of difference in how real estate companies grow during this period.
Condotels seem to be one of those opportunities. Many experts have agreed that they're the "next big thing" for property investment. Why would they say that? You'd be surprised by the advantages this relatively new concept brings.
What does the concept mean?
As NBC News reports, condotels let investors buy a property, unlike timeshares. This purchase can be a hotel room, studio apartment, or even a villa.
In other words, people can buy space in a hotel or vacation resort. It also allows them to own the space, accessing the property’s amenities, and rent their investment when they’re not using it.
Condotels in practice
Buying a condotel means acquiring property, and owners can use it as their main residency. The main obstacle mentioned by the article is that there could be restrictions on how long you can stay there.
Owners can use all the hotel’s amenities, being partly responsible for these areas’ maintenance, thus paying upkeep fees. They can also list their property for rent within the hotel or condo, creating an additional income stream.
Investors must also pay property managers a fee from their rental revenue for booking, housekeeping, and similar services. In layman’s terms, you get to buy a hotel room and rent it with the others.
Short-term rental popularity and condotels
Short-term rentals have become increasingly popular over the years. Forbes details how more people prefer to give up the luxury of traditional resorts for the affordability and convenience of vacation rentals.
Condotels offer an excellent option for investors looking to profit from this trend. It allows them to operate short-term rentals while curbing many of the obstacles brought by government regulations and bans on short-term rentals.
How does the investment work?
According to the article, investors have three options. They can buy a property as a vacation home. Renting the entire property when you're not there, or subleasing an unused area, offers a flexible investment. It's also possible to dedicate it solely to short-term rentals.
Why are they so promising?
Right now, condotels are free from problematic laws related to short-term rentals in residential properties. Renting these spaces is the same as booking hotel rooms while providing all the benefits from short-term rentals.
The role of short-term rental demand in condotels’ expectations
Airbnb and similar solutions have driven considerable demand for short-term rentals. Consumers seem to start a migration from traditional hotels to short-term rentals. Even amid COVID-19, short-term rentals have remained popular thanks to their safety and privacy against hotels prone to crowding.
Important considerations when investing in condotels
Condotels are a considerable investment. They can yield prominent returns thanks to growing demand, but it's not a decision you should make wisely. For a start, you need proper budgeting and forecasting before buying this type of property.
Just like any other investment, condotels offer advantages and disadvantages. For many investors, the pros outweigh the cons. That doesn’t mean you should overlook the risks brought by these assets.
What's good about them
Flexibility
Condotels offer many possibilities. Owners can use them as an office, vacation home, or dedicate them entirely to rentals. Constructing condotels is usually cheaper than traditional hotels as well.
Demand
Condotels, and short-term rentals in general, are increasingly more popular than traditional hotels with time. As we discussed, they’ve fared considerably well within the hospitality sector, even during the pandemic.
Amenities
Condotels allow homeowners and tenants to access luxurious amenities. Installations often include pools, housekeeping services, and gyms. However, it’s more affordable than a resort.
Security
Usually, condotels still receive maintenance from major hotel brands and property managers. That makes them benefit from excellent security measures, especially with the growing demand for this sector.
What's bad about them?
Ownership
Ownership is often a partnership with the building’s owner. Many experts see condotels as part-ownership with added privileges. Some condotels even require owners to notify and book their stays in advance.
Maintenance
Condotels are considerably more expensive than an apartment. That’s because of the mentioned amenities: pools, gyms, and more. Condotel owners are responsible for their maintenance and must pay additional fees for their upkeep.
Regulation
Finally, condotels are quite complicated when compared to homes and hotels. While that’s often seen as an advantage, it also makes the purchase and rental process significantly more complex.
What does this mean for high-rise development?
We also need to consider one of the most prominent developments in the real estate sector. High-rise properties have consistently gained popularity. Demand for these versatile and attractive properties keeps growing.
Thankfully, high-rise development is still a growing market. McKinsey & Company offers amazing insight into the sector’s promises. Interestingly, high-rise properties could even benefit from the growing condotel trend.
The sector is evolving considerably
The article focuses heavily on how the sector is expected to change by 2030. Prefabricated development and modular construction are two promising trends, according to experts. Additionally, general pollution restrictions are part of the expectations.
Nevertheless, the most prominent change will be the properties’ aim. Traditionally, high-rises aimed for specific functions, like apartments and offices. Dedicating different sections to different markets is becoming more common. Therefore, it’s expected for high-rises to contain residential, office, retail, and even service spaces.
Therefore, property management might also become significantly more complicated. Integrating the latest real estate software will be vital to ensure high-rises are as profitable as possible.
What do condotels mean for high-rise development?
High-rise properties can become prime opportunities for investments in condotels. They often offer attractive amenities, like great views, retail space availability, and more. As high-rises become more popular, they’ll likely offer excellent short-term rental chances.
High-rise buildings provide more comfort than traditional resorts. You can access shops, grocery stores, gyms, and other services without leaving the building. Therefore, they make excellent condotel options, particularly because of how convenient they are.