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Condo Hotel Boom in South Florida
What are condo hotels? Simply put, it is when the developers sell off each hotel room to buyers. In essence, instead of financing the project through the bank, they are getting the money directly from the buyers in the real estate market to fund the project. This way the developers do not have to worry about making loan payments early on. It has been a big boom for condo hotel developers here in South Florida, from Ft. Lauderdale, Miami Beach to Key Biscayne more than 30 projects are either in planning stages, already in development or have already been built and sold. Its just a big excitement for condo-hotel developers to have such quick access to all this cash.
Few analyst say that there is a handful of condo-hotels that have been built to offer as comps to buyers who invest in these projects and even then many wonder if this is a good investment. The tourist industry also worry that there will not be enough room since many buyers maybe using these units as homes leaving less rooms for the thousands need for conventions that come here to Miami Beach. In this case the profit is split between the owners and the management. Also, the developers state that they pass on the debt, property taxes and other cost to the unit owners with an instant profit on real estate. Plus, unit owners can any time stay for free when visiting and then developer says that most buyers turn their rooms over to hotel management to rent out for them. But its not a cash cow. Itís not a great investment. Developers are warned by the Federal Government to call these projects an investment; b/c it is difficult to get financing and the appreciation is not that quick. You may break even at the end of the day.
Jumping on the band wagon is the Sonesta Beach Resortís 294 hotel room in Key Biscayne converting its hotel into a condo-hotel and also Ian Shragerís cool Shore Club has quietly made a reservation list for its 325 rooms in South Beach. Other new condo-hotel projects are the Tides (once owned by music mogul Chris Blackwell, Breakwater and Edison and even the Royal Palmís 417 room were all bought by the Falor Cos.