Forbes takes a look at the condo hotel trend, A Room Of Your Own and finds that it might not be all that it is cracked up to be:
Kearney bought his room at the W Las Vegas for $493,000 (his broker got him in before units went on sale to the public for $650,000). If he snags a five-year interest-only loan, common for condo-hotels, he’ll pay $23,664 yearly. Once the hotel is built, he must shell out for a condo fee ($6,000), insurance ($250), a furniture replacement fund (5% of gross rentals) and taxes ($4,930). Then add $40 for maid service each day it is rented. Now assume the room is full 75% of the year, at $270 per night. He collects just 55% of rental income, or $37,000. Result: He’ll be $12,500 a year in the hole.
Popularity: 7% [?]
3 responses so far ↓
1 Turk // Jan 3, 2007 at 11:11 am
Had 10% down on a $1M unit at the W Las Vegas, but after reading this article, decided to back out. Fortunately, hadn’t yet gone to hard contract and was able to get the entire deposit refunded. The idea of a condotel seemed appealing, but there are too many uncertainties (rental rates, occupancy, fees) to make this a sound investment. I’m glad this article came out when it did…
2 CHESSNOID // Sep 5, 2007 at 9:32 pm
It would be cool if you could get a follow up on this story to see how the owner actually did. It is possible that the property went up higher or that his room was rented out over 90%. Although $270 a night seems extremely high. Just a thought.
3 EconE // Sep 5, 2007 at 9:53 pm
are the taxes that are referred to property taxes? If so…does the person also have to pay income tax on the 37k rental income?
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