I started writing Lazy Man and Money in 2006 due to a unique wake up call: My fiancé was going to retire at age 43, with a military pension due to 20 years of service.
Who wants to work another 22 years after their spouse retires? At the age of 30, I could look to retire in about 12 years with her, or work 3 times as long and retire at 66.
My mission: Explore and build income streams.
I didn’t know you could make money with a blog, but I did know that it could help you connect with like-minded people. (This was when social media was defined by MySpace.)
Around that time I had read that investing in hotel rooms was a hot new market. This isn’t just buying shares in publicly traded hotel company. This is buying something called a condo hotel.
What is a Condo Hotel?
A condo hotel is exactly what you may imagine it is: a combination between a condo and a hotel. Basically it works like this: You buy the hotel room as if it’s a condo. You can stay in that room whenever you want (it’s your room after all). Alternatively, you can release the room back to the hotel for a split of the proceeds when it’s occupied (the hotel gets money for managing it). The rules seem to be different for each property, but that’s the gist.
It’s legally managed like a condominium, but the operated as a hotel. When I first heard of this back in 2006, it seemed like a crazy, but cool idea. Nowadays, it makes more sense to think of it as a condo that you buy with the intention of turning it into an AirBnB.
Sounds like an exciting investment right?
Why I seriously considered buying a Condo Hotel
I find that often get enamored by the best case scenario.
Even if I had to pay fees for maintenance, at $150 a night is over $50,000 a year. This was also around the time that Paris Hilton was starring in the Simple Life. Not everyone is able to start or buy a whole chain of hotels. However, one room? That’s something that an individual investor might be able to do.
Around the same time that I was reading the article above, I had heard that the The W in Las Vegas was looking for investors. The main big investors were in place, but they were looking for individuals to buy in. That helps with their building costs too, right?
I was definitely attracted by four things:
- It’s tempting to be a landlord and an hotel owner without having to do any of the maintenance, right? (Of course I’d still be paying for the maintenance, it’s just great not to get those 3AM calls about a broken water heater.)
- The premium W brand and quality. At the time, I had a friend who traveled a lot for business and he really loved the W brand.
- The premium tourist location – Las Vegas. When I think of people vacationing in Las Vegas, I presume that a certain large number have a lot of disposable income. I like the combination of people with a lot of money looking to spend it on a luxury experience.
- The pre-construction pricing, which I presumed would be the best rates. While this is not always true, it feels like the early bird should get the worm, right?
Ultimately, I decided not to buy into the W condo hotel opportunity. If you’ve read the Wikipedia write-up that I linked above, you know I made the right decision. It sounds like it was an unmitigated disaster.
Why I didn’t buy a Condo Hotel
One of the easiest ways not to buy something is to literally not have the money. I might have been able to make some terrible financial decisions like sell off some retirement accounts (absorbing a big penalty) and leveraging a mortgage. That’s not a good idea for almost any investment scenario.
Let’s pretend that wasn’t an obstacle. When I reached out to the the organization planning it, I found that it was impossible to get all the numbers. For one, they didn’t know what vacancy rates might be. They certainly had a better idea than me as they were in the business and familiar with the area. I was working with no knowledge. If the place has a high vacancy rate, there’s not going to be a lot of profit for me to sell my room. (I’m not ready to buy a white lounge lizard suit so I would have needed it to be rented.)
However, even if they had good vacancy and nightly cost estimates, they couldn’t give them to me. If they give out that information, the condo hotel qualifies as a security to the SEC and gets regulated much more rigorously.
Where Can I find a Condo Hotel?
Typically condo hotels are in resort places like Orlando or Miami in Florida and, of course, Las Vegas.
I wish I knew some reputable companies to work with. This is why I felt a little better working with a big trusted brand. I don’t think I would have given my business to Joe’s Condo Hotel Sales ‘R Us. If you know a trusted, household name that works in this area, I’d love for you to leave a comment with that corporation’s name.
Lessons Learned from My Condo Hotel Experience
When I decided to do this review, I wanted to pluck out all my nose-hairs for even considering it in the first place. However, I as I reflect more about it, I am taking a more balanced view. I’m not sure if all condo hotels are a bad idea. Perhaps it could work for some people in some situations. I’m trying not to make a blanket judgment based on one ill-suited (to me) condo hotel that seemed to have difficulty.
After all, this condo hotel example is precisely why I started this blog. I wanted to share ideas to sort out which are good and and which are not so good.
I did find one example of someone who did find a condo hotel that works great for them. My friend J$ did the heavy lifting in an < href="http://www.budgetsaresexy.com/we-bought-hotel-room-called-condotel-live-in-it/">interview with someone who lives in a condo hotel.
I hoped that readers would help me by keeping me grounded from bad ideas. Along the same lines, I wanted to help others where I can as well.
It’s always great to have discussion around a topic. That why I am begging you to leave comments at the end. If there’s one topic that needs more discussion, it’s condo hotels. I rarely see anyone talking about them.