Condo Hotels – The Most Economical Choice in Secondary & Vacation Homes

In a condo hotel, a buyer makes a fee simple purchase of a deeded condominium unit/guestroom. When not occupying the room, the owner may make the unit available to guests at the hotel through a rental management or leaseback program. Any room revenue generated through the program is shared between the unit owner and the developer/managing partner. This scenario provides a host of tangible benefits for the condominium owner, including a deed to a physical room, access to all hotel amenities and the ability to take advantage of a 1031 tax-deferred exchange. Condo hotels differ from other vacation home models in a variety of ways.

The condo hotel concept has numerous advantages over other vacation models, including greater product consistency, fewer ownership conflicts and hassle-free rental opportunities.

Seldom-used vacation homes take time and money to oversee and maintain. With a condo hotel, you get the services and flexibility without the time commitment. The on-site management company takes care of all maintenance, finds renters and takes care of renters’ needs on-site.

You have full ownership of your condo hotel unit and may sell it at any time.

When you’re not using your unit, you may place it in the hotel’s rental management program and share the revenue it generates.

A condo hotel unit is an asset that you may sell at any time, and, you keep 100% of the profits.

Standardized furniture packages are often incorporated into the price, or at minimum, your turnkey unit should look like all the other units in the hotel

Units rented to hotel guests suffer wear and tear. Expect special Furniture, Fixture, and Equipment (FF&E) assessments to replace worn carpet, drapes, furniture, etc.

The rental program allows condo hotel owners to earn rental income and provides access to hotel services and amenities

Potential for tax breaks associated with mortgages and depreciation.

Maintenance free ownership because property managers handle all maintenance.

Ability to take advantage of a 1031 tax-deferred exchange.

To assure room availability for visitors and tourism, local governments may limit the amount of time owners may use their unit.

Financing can be more costly than for a primary residence – usually +1%.

If the owner wants to use the unit, they should notify the hotel in advance.

Owner should pay additional fees if they want to utilize housekeeping and other services.
Income from rental may fluctuate if there is a decline in travel, desirability of the unit, or based on hotel rental rates.

Condo Hotel Owners may need to purchase additional insurance riders to protect against liability claims and damage or loss.

Condo Hotel Owners will pay monthly Condominium Association Fee’s

Should a condo hotel owner decide to participate in a rental agreement, they should determine if the property has a static “hotel room” inventory. Commercial unit “rental preferences” over privately owned units could affect rental opportunities, check rental agreement language to insure fair and equitable distribution of rooms among both commercial hotel rooms and participating privately owned condo hotel units.

Additional particulars pertaining to the successful operation of condo-hotels are highlighted as follows:

– Rental contract term is typically 6 months to one year.

– Check owner’s intent to occupy notification requirements, necessary to guarantee availability for

individual owners.

– Unit owners should receive quarterly statements showing a detailed breakdown of all unit and account

activity.

– A rotational booking program should be used to ensure that units in the rental program enjoy a fair and

equitable distribution of rooms sold.

– If there is an unusual or extraordinary event, the hotel guest may be charged for damage to the owner’s

unit. Normal wear and tear is anticipated and is the responsibility of the unit’s FF&E reserve account.

In order to place a unit in a rental program, a management and rental agreement is first signed between the unit owner and the hotel management company. This agreement provides for a number of variables, primarily:

– A portion of the revenues received from the nightly sales of rental program units flows through to the condo hotel owner. This is typically a 50-50 split after a 7-11% Marketing Fee and a 7-10% FF&E Capital Reserve are deducted. The hotel management company/operator retains the remaining portion of the rental revenue stream.

– A Usage Agreement is implemented between the condo hotel owner and the management

company/operator, providing for the implementation of an FF&E reserve.

– The FF&E furnishing packages should meet certain standards. Failure to comply with such standards may either require immediate refurbishment at the unit owners’ expense, or the expulsion of non-conforming condos from the rental program.

– Responsibility for the maintenance and repairs of common space is allocated among condominium hotel unit owners, based on their pro-rata shares. A Homeowners’ Association (HOA) is usually set up to retain ownership of such areas and oversee the collection of dues from condo hotel unit owners. These dues typically cover reserves, common area maintenance, property insurance and utilities expenses. Property taxes are usually paid for directly by each condo hotel owner, and the hotel manager pays for any operations costs including salaries and other direct hotel expenses.

Developers create projects by building or converting resorts and sell units through sales and marketing programs. Marketing costs can run as much as 11% – 15% of the unit selling price, and are rolled into the price of the unit.

Much of the actual law governing the sale of condo hotels is established by the property’s municipality and state. State laws cover most aspects of condo hotel documentation, but there are important federal laws that should be considered. The sale of a condo hotel unit, coupled with certain other elements, classifies the offering as a security.

In 1973, the Securities and Exchange Commission (SEC) determined that selling resort condominiums through a sales effort that emphasized economic benefits (such as rent-programming, mandatory rental program participation and use restriction) made the sale an investment contract and not a real estate contract. This section outlines the key differences between these two transactions.

Security offerings should be registered with the United States Federal Security and Exchange Commission (SEC) and should also meet state level securities registration requirements.

The SEC states that:

– The sale can be marketed as an investment as long as it includes information about anticipated rates of

return.

– A seller can represent a condominium hotel unit as an investment (including mandatory participation in

the rental program and potential appreciation in the value of the unit) and can program rents and

expenses among unit owners.

– All sales materials should have the necessary warnings and disclaimers typical of a prospectus.

– Large projects should file periodic disclosure reports with the SEC, similar to publicly traded companies.

If the securities are not registered and not publicly traded, then there are the following limits on resale:
– Sale is limited to accredited investors (who should have certain income/asset levels)
– General advertisement is prohibited
– Sale or resale requires the use of registered securities broker dealers

This first model is the most prevalent type of fee simple real estate transaction. It separately deeds the commercial area of the operating hotel from the guest room areas. It then turns the guest rooms into condominium units which are sold. The hotel’s remaining commercial units are retained and operated separately from the Condominium Association. The hotel offers rental agreements to individual condo unit owners; enabling them to take advantage of rental income while at the same time supporting ongoing hotel operations.

In order to place a unit in a rental program, a management and rental agreement is first signed between the unit owner and the hotel management company. This agreement provides for a number of variables, primarily:

A portion of the revenues received from the nightly sales of rental program units flows through to the condo owner. This is typically a 50-50 split after a 7-11% Management Fee and a 5-10% FF&E Capital Reserve are deducted. The hotel management company/operator retains the remaining portion of the rental revenue stream.

A Usage Agreement is implemented between the condo owner and the management company/operator, providing for the implementation of an FF&E reserve.

The FF&E furnishing packages should meet certain standards. Failure to comply with such standards may either require immediate refurbishment at the unit owners’ expense, or the suspension or expulsion of non-conforming condos from the rental program.

Responsibility for the maintenance and repairs of common space is allocated among condominium unit owners, based on their pro-rata shares. A Homeowners’ Association (HOA) is usually set up to retain ownership of such areas and oversee the collection of dues from unit owners.

This second model deeds the guest rooms into individual condominium units including ownership of the hotel’s operating components such as public areas, meeting facilities, and services.

The unit buyers are automatically part of a Condominium Association and hire a third-party to manage operations and assets. The condominium association shares 100% of the economics of the operating hotel.

This second model is less prevalent because Home Owner and Condominium Associations are typically not allowed to execute contracts for periods in excess of a year. While some credible hotel management companies are willing to operate property’s on a year to year basis, it is more difficult to negotiate these terms with hotel brand companies.

A fee simple real estate transaction is not considered a security offering (investment) and does not require SEC registration. In order for a property/development to be considered a fee simple real estate transaction, and therefore exempt from SEC registration, it should meet the following criteria as described in the SEC’s series of “no-action” letters:

– No emphasis on economic benefits from the efforts of a third party.

– There is a record and timeline of the sales process and the subsequent sale of the rental program.

– No representations may be made regarding economic or tax benefits of ownership.

– Rental services may not be advertised in the materials offering the unit for sale.

*The rental program is not used as an inducement to purchase.

– Prospective purchasers are provided with materials containing publicly available information regarding

*comparable developments. These may not include forward looking estimates or projections or

speculative information.

– No contract for rental or management of the purchased unit may be entered into before a commitment to purchase the unit (non-refundable deposit should be received and the contract should have no unsatisfied contingencies).

– No rental income pooling, accounts must be maintained separately by unit.

– No limits on occupancy by the owner in the sale documents other than those established by generally applicable zoning laws (can have limitations later under the rental program agreement).
– Fairly access all owners, participating or not participating in rental program

*The use and disclosure of such materials (in advance) of purchase may require registration as a

security, check with your counsel.

See the Intrawest No Action Letter

Utilization of The National Association of Condo Hotel Owners, NACHO http://www.nacho.us> advisory, rating & evaluation services to accomplish the by the National Association of Condo Hotel Owners, through the utilization of association guidance into the overall forging of the condo hotel program warranting resulting approval.

No representations made that infer that the purchase represents an investment and instead purely as real-estate and extension of lifestyle.

The rental program may be listed as one of many privileges of ownership.
Response to inquiry during sales process: The rental program does not pay a mortgage but depending on participation, can compensate for a portion of the annual cost of ownership. We are proud members of the National Association of Condo Hotel Owners, we have been “approved” by our evaluation, the results of the evaluation can be found at http://www.nacho.us

With continued buyer questioning on rental program…I apologize but current guidelines require that this sale be made as real-estate and prohibit me from providing any information that may be interrupted as an investment. In advance of your decision to purchase, you are welcome to log onto http://www.nacho.us become a member and see the results of the independent evaluation including resources and tools to help you understand our property and this purchase.

Sharing the details of the rental program in advance of the purchase decision could be interpreted as an inducement to purchase and require refunds and SEC registration.

No contract for rental or management of the purchased unit may be entered into before a commitment to purchase the unit (non-refundable deposit should be received and the contract should have no unsatisfied contingencies)

There is a record and timeline of the sales process and the subsequent sale of the rental program.

The rental program and management agreement is provided following the execution of a purchase and sale agreement and non-refundable deposit.

No rental income pooling, accounts must be maintained separately by unit.

No limits on occupancy by the owner in the sale documents other than those established by generally applicable zoning laws (can have limitations later under the rental program agreement).

Creating disincentives for parties not participating in rental program

Creating disincentives for parties not participating in rental program

Fairly access all owners, participating or not participating in rental program

Galapagos Cruises Versus Galapagos Hotel Based Tours

If you are not sure what type of Galapagos visit best suits your needs, the following information should provide you with a good understanding of the different types of tours available. Both cruises and hotel-based tours allow tourists to view unique wildlife, spectacular landscapes, and participate in activities such as snorkeling and hiking. The most obvious difference between these two options is sleeping arrangements with the choice of either hotel accommodation on land, or a cabin aboard a yacht. However, there are many other important factors to consider when deciding which type of trip is right for you. Cruises are a great option for those who desire the full Galapagos experience and who have relatively few physical limitations. Most cruises offer very impressive itineraries, visiting not only major sites but also remote islets in the archipelago. Because most of the navigation takes place at night, you are able to spend more time visiting the islands and doing activities during the day. On a cruise, a naturalist guide leads all of your tours and an experienced crew attends to your needs onboard including the provision of great international cuisine for breakfast, lunch, and dinner. As well as providing a place to relax on deck and enjoy the sunset with a cocktail, most cruises also offer evening presentations about conservation, cultural history, or important Galapagos information. If you are prone to seasickness, larger cruises tend to be the most stable, followed by catamarans, and finally other vessels. Most cruises can accommodate for some minor physical disabilities. The largest cruise ships in the Galapagos offer programs that may appeal to certain travelers: “formal” evenings, on-board spas, glass bottom boats and karaoke for example. Hotel-based tours offer a choice of four options: land-based, diving, multisport and island hopping. All of these give visitors the opportunity to choose their accommodation from a range of budget, midrange, first class and luxury hotels located on the Islands of Floreana, Isabela, San Cristobal and Santa Cruz. Staying on one of the Islands provides the opportunity to spend time in the ports, browse the shops and eat out at one of the many restaurants as well as get to know the local communities. The hotel-based options also offer a wide range of activities to suit all interests, thus allowing visitors the flexibility to build their own schedule. However, as only four of the major islands have hotels, programs and visiting options may be limited, as day visits to some islands may be impractical due to navigation time to and from the nearest hosting island. In summary, both cruises and hotel-based tours have their pros and cons, so take the cruise option if you:

  • Enjoy travelling by boat
  • Want to visit more than just the sites on the main islands
  • Prefer following a pre-determined itinerary with a guide

And opt for a hotel-based tour if you:

  • Want to spend more time on the main Islands
  • Don’t want to be limited to onboard facilities and services
  • Would prefer the flexibility of planning your own schedule

Either way, a cruise or hotel based experience in the Galapagos Islands will be memorable! Explore the Galapagos Islands and enjoy the best visitor sites, unique wildlife and breathtaking views. Find out when the best time to go is and choose the tour that suits you best with our Free Trip Planner.

Want To Stay Near The Best Parks And Rides? Book A Disney Orlando Hotel!

Orlando vacation would never be complete without exploring the Disney World Resort. For most vacationers, this is the top venue where they would spend the majority of their vacation days. Hence, if you are one of those who choose to prioritize the Disney World Resort, theme parks and rides, make sure you book a Disney Orlando hotel today.

There are different reasons why more and more visitors and guests prefer to stay in hotels within or close to the Disney World Resort theme parks. As the name implies, these hotel accommodations have their basic and most coveted feature which is in near proximity to Disney World. Here is the list of reasons why Disney Good Neighbor Hotels are the wisest and most practical choices for your Disney vacation getaway.

Quality and High Standard

There are certain standards observed and required for a hotel to be a part of the Good Neighbor Hotel program which is assessed and inspected by a Disney executive. This program is actually conducted or designed to monitor and qualify hotel accommodations and get the stamp of approval for their hotels. The hotel could only qualify and get approved if they meet the highest and most stringent standards and requirements. Hence, whenever you book hotels approved by this program, you are 100% sure of its quality and standard.

Closest Proximity to Disney World

The fact that these hotels are considered Disney Good Neighbor hotels means these are on-site or just around the major theme parks, rides and other features in the Disney World Resort. Hence, guest and visitors enjoy walking distance accommodations to their all-time favorite rides and theme parks. Most of the hotels also provide exclusive privileges for their guests such as VIP pass to avoid long lines and wasted times. You could also purchase Disney tickets at the Customer Service or Front Desk so that you no longer have to wait in line to get your ride and theme park tickets.

Great Affordable Rates

You could avail from 30% to 40% discounts if you book or reserve your hotel accommodations with a Disney Orlando hotel. Most hotels in Disney World collaborate with their partner establishments so that they could offer extras and freebies to their guests. For instance, you could avail the free meals for kids or there are those who offer instant privilege to access rides without putting up with the long lines.

Shuttle and Customer Service

In availing the best Disney Good Neighbor hotels, guests are given free scheduled shuttle services in different Disney World theme parks and rides. Guests are dropped off in the morning and could avail the free shuttle service scheduled to pick up hotel guests at night. Just imagine how much you could save from hefty transportation fees and fuel expenses.

Reward yourself and your entire family with the most magical vacation in Disney Orlando. To guarantee hassle-free and fun-filled getaway experience, the wisest way is to find the most comfortable, plush and budget-friendly Disney Orlando hotel throughout your stay.

Hotel Software – Top Reasons to Use One

Hotel software can offer you top benefits. It can by highly effective for the purpose of hotel management. All you require to do is to opt for the best software and you will be able to benefit from valuable tool for administration of hotel and its management. The key is to choose the best software. This will help you enhance efficiency and help you run things smoothly. Advanced software can help you with varied aspects of hotel management.

The best hotel software is highly capable of providing the power required manage all the requisite functions. This is possible even when things get tough and unmanageable. It will also offer you the kind of flexibility that you require when managing a hotel. This also means that you will be well equipped to face any situation that may arise in your way of running a hotel efficiently and smoothly.

The market is full of varied types of hotel software. It is important to make a huge research on varied types of software packages available on the market. This will help you comparison shop and use one that is the best. Understand that different types of software hold different capacities. Hence, it is important to decide on one that will be capable of meeting your specific requirements.

Since there are more than hundreds of hotel programs available these days, you need to keep your priorities in mind prior to deciding on one. There are packages that will serve many purposes of yours whereas some are able to excel in a particular field.

Hotel software is generally designed for running hotel reservations and managing various other functions. Organizing campaigns for marketing is also another specialty of the software. With this software, you can facilitate communication via email, traditional mails and a phone. Try choosing software that is capable of handling the amount of work it must perform. Many of the programs available on the market can be modified as per your specific requirements.