Why It’s Best to Buy Condo Hotels in the Pre-construction Phase

Hassle-free Vacation Homes

Interested in getting in on the condo hotel trend? Perhaps you’ve heard about this new type of vacation home ownership, and it sounds right for you. After all, a condo hotel unit is typically located in a great vacation destination. It’s in a three-star or higher property. And a management company takes care of all the hassles typically associated with ownership, including finding renters when you’re not using your condo hotel unit.

With many new condo hotel properties coming on the market, when is the best time to buy? The answer is easy. In pre-construction. That’s right, most condo hotels begin selling their units long before the property is built, and often before even the first shovel-full of dirt is overturned.

A Deposit Holds Your Condo Hotel Unit

In some cases, you simply place a reservation with a deposit of usually 10% to 20%. The deposit goes into an escrow account of the developer. The funds are invested in a low-interest passbook account, and any interest paid on the account (usually minimal) is applied to the purchase price. You can expect to go to contract once the developer has sold enough units to meet lender requirements (usually about 50% of the total number of units?) and has applied for his construction loan.

At that time, your reservation will be converted into a hard contract, a binding agreement. Depending on the recission period of the individual state in which the property is located, you’ll typically have 7 to 15 days to decide whether you want to proceed with the purchase or cancel.

The Construction Process

How long does it take to build a condo hotel? Well that depends on a number of factors such as whether the property is to be built new or whether it’s a conversion of an existing hotel or resort, the weather and the permitting process. Generally, for a new property, it takes close to two years to build; conversions take six months to a year.

Appreciation Makes Pre-construction Appealing

Some people wonder why they should buy in pre-construction. After all, your deposit monies are tied up for one to two years. The answer is you get in on the ground floor when prices are lowest and unit selection is greatest.

As the condo hotel is being built, it is gradually appreciating. Developers implement planned price increases at various stages of the selling process. If you purchase your unit at a pre-construction price, it potentially could be worth significantly more at completion. When you sell, that translates into a higher profit for you. The actual profit of course depends on the general market conditions, interest rates and competition.

Subscribe to a Condo Hotel Newsletter | If buying a condo hotel unit in the early pre-construction phase is best, how you do you find out about projects? After all, it’s not as if there’s a building structure to catch your eye as you drive by. Your best bet is to find a realtor who specializes in condo hotels or to sign up for a condo hotel newsletter, one that will keep you apprised of new condo hotels coming on the market, as well as building trends and hot developers.

Joel Greene is the President of Condo Hotel Center located in Miami Florida, which specializes in the sale of condo hotels. Visit his web site, for more information on condo hotels and to see condo hotel listings, photos and prices. You can also sign up for his free Property Alert newsletter to be notified when new condo hotel properties come on the market.