We have a "condotel" on St Pete Beach in Florida. If you haven't heard of the condotel model, you'll want to look it up. Ours is at the Tradewinds resort in the Jacaranda building. We net between $45-50k per year and do zero for it. No cleaning, no calls, nothing. Our LLC bought it 5 years ago, and could be convinced to sell off a percentage. Oh, by the way, each 25% includes a free 7 night vacation at the resort (or broken up nightly) with all on site amenities included. Gulf front, 6th floor (so your views are over the tops of the palm trees) master bedroom with a king to sleep and an ensuite, two other queens, another bath and full kitchen.
You might consider this a hybrid investment with vacation benefits. This is not a time share in any way. Our LLC is on the deed and they sell like regular real estate.
Setting aside the potential for improved ROI for a moment, here's how the (over-simplified) numbers look to me personally.
If I were to buy 50% outright, that would be 22k net income / 340k purchase = 6.5% CoC ROI. I could get that in a stock market index fund with a whole lot less hassle and risk.
If I were to mortgage it (assuming I even could, what with the fractional ownership) it would be 340k purchase with 20% down @ 5.5% = 68k down pmt and 1823/mo (22k/yr) in mortgage costs. That brings my ROI down to exactly zero. (half of 44k income is 22k, less the 22k mortgage = zero)
I admit this is oversimplified, but I think I'm in the ballpark, right?
If I were you, I'd keep enjoying that income and manage it yourself - thus increasing it. Or sell it and take that 679k and leverage it by buying 5-10 other properties (with mortgages) that have better ROI's
We were able to buy low years back when the market was hurting to get a 10% ROI. The values have gone up and our cap rate is now less than a hands on property would be (we have several, that's all we do). The family loves the resort so we want to hold 25% but my expertise in hands on renos and management would provide a higher ROI.
No mortgage. Earlier this year we decided to sell it for the reason I gave earlier, I'm semi retired and have time to be hands on, thereby making a better ROI. Then we stumbled upon "fractional ownership". That got my gears turning that led to selling fractions of ownership of our LLC that owns this unit outright. The asking was $679k (still is listed as we were in no rush or need to remove it. Hey, if we got full asking price, we would consider it unless we have a fraction sold) You can look it up. Jacaranda at Tradewinds, unit 6222.
As to "bill o brady", you should do some research like I did. I thought it sounded too good to be true also. 5 years later, I'm thrilled that I did my homework.
And since o brady is confused, I wanted to clarify this, we own one single unit in this almost billion dollar resort. The resort plus condo fees and replacement fees keeps nearly 66% of room revenue. Through November of this year, the unit generated $130,355.23. Of that, my take was $44,446.79. We get detailed reports monthly along with our direct deposit from them. November's keep was $3,380.29. I also know the night's that sold and which night's I had free rights to stay there.
Setting aside the potential for improved ROI for a moment, here's how the (over-simplified) numbers look to me personally.
If I were to buy 50% outright, that would be 22k net income / 340k purchase = 6.5% CoC ROI. I could get that in a stock market index fund with a whole lot less hassle and risk.
If I were to mortgage it (assuming I even could, what with the fractional ownership) it would be 340k purchase with 20% down @ 5.5% = 68k down pmt and 1823/mo (22k/yr) in mortgage costs. That brings my ROI down to exactly zero. (half of 44k income is 22k, less the 22k mortgage = zero)
I admit this is oversimplified, but I think I'm in the ballpark, right?
If I were you, I'd keep enjoying that income and manage it yourself - thus increasing it. Or sell it and take that 679k and leverage it by buying 5-10 other properties (with mortgages) that have better ROI's
Have it your way. The less attractive view and smaller units get very close to your example numbers and sell all the time. I'm looking for higher ROI and so are you, fair enough. There is a definite market though.
P.s. don't fool yourself with the market near term. Volatility is a looming...
I could see this condotel being a nice investment for someone. I have something similar to this in Cape Town South Africa. A few of the hotels there have where you buy/own the actual unit and you become part of the "rental pool" & get monthly dividends based on how well the hotel does..this one sounds similar. I love mine and is a fun investment. I've owned since 2005 & it's been a total hands off investment with perks of being able to use the hotel. The biggest risk is the potential of the management going bad or in South Africa the political climate.
Here's an example if anyone wants to look for fun. This one is about 82K US dollars
We have a "condotel" on St Pete Beach in Florida. If you haven't heard of the condotel model, you'll want to look it up. Ours is at the Tradewinds resort in the Jacaranda building. We net between $45-50k per year and do zero for it. No cleaning, no calls, nothing. Our LLC bought it 5 years ago, and could be convinced to sell off a percentage. Oh, by the way, each 25% includes a free 7 night vacation at the resort (or broken up nightly) with all on site amenities included. Gulf front, 6th floor (so your views are over the tops of the palm trees) master bedroom with a king to sleep and an ensuite, two other queens, another bath and full kitchen.
You might consider this a hybrid investment with vacation benefits. This is not a time share in any way. Our LLC is on the deed and they sell like regular real estate.