Is a condo-hotel a smart investment? Discover the pros and cons of owning condotels and whether it’s a good investment choice.
Las Vegas is home to many high-rise condos and hotels. They feature stunning architecture, world-class amenities, and enviable locations that put you – or your guests – within minutes of the top dining, shopping, and entertainment venues in Las Vegas and The Strip. Whether you’re a seasoned investor or a new one, you’ll want to consider adding condo-hotels in Las Vegas into your investment portfolio.
Before you shop around for a condo-hotel, make sure you know what a condotel is to make an informed decision. You can check out the Top Las Vegas High Rises with Rental Programs, if you are looking at this investment.
A condotel, or condo-hotel, is a condominium project that operates as a hotel and enjoys the same amenities and services as a traditional hotel. However, some units are individually owned, and the owners can make them available for rent (short- or long-term). However, the unit is placed under the hotel’s rental program, wherein paying guests will pay on a nightly basis, depending on how many nights they choose to stay.
Investors who are buying condotel units can also make it their second home. For example, they have a space available for visiting Las Vegas, eliminating the need to book a hotel room.
The primary appeal of condo-hotels is that they are managed by the building staff. The full-service staff helps with not only the maintenance of the unit but your short-term rental guests have access to housekeeping and concierge services.
Condotels are primarily an investment. It is a great way to generate passive income. Although the profits are not as high as other real estate investments, they are good enough to cover the mortgage payments and achieve a steady cash flow.
If you want to expand your real estate investment portfolio, it’s a good choice for you because Las Vegas real estate market is one of the nation’s hottest. Las Vegas is also a tourism hub. Tourists flock to Las Vegas and nearby areas all year round. Therefore, there will be a demand for condotel rentals throughout the year.
It’s an easy way to generate passive income because you can be hands-off with property management.
The main benefit of owning a condotel in Las Vegas is you can enjoy the best of both worlds. These developments are usually in an attractive location, such as being minutes away from The Las Vegas Strip. Plus, you can tap the full-service staff in the hotel that will manage your unit to ensure that it is in well-maintained condition for your guests.
You can also leverage the popularity of Las Vegas to generate a steady, passive income for your rental property. The condotel management can also help with marketing your property, such that you can lower the vacancy rate of the unit, even during the off-season.
Any revenues you earn from your rental unit can pay for the mortgage and other fees in the building. But the biggest advantage of all is that the equity of your property will increase over time, which enables your investment to beat out inflation. Since Las Vegas is a tourism hub, you can expect a high demand for your rental property throughout the year.
You can even reserve the unit for personal use, such as when visiting Las Vegas. You won’t need to pay extra for a hotel booking since you have a guaranteed place to stay.
While there are plenty of upsides to owning a condotel unit, there are also notable downsides. The first and major downside is that you have to split the revenue with the building owner. The property management fees can range from 30-60%! Therefore, the passive income you can generate will be much lower than if you were to manage the rental.
In addition, you – the unit owner – will shoulder the maintenance and other fees, such as HOA. That is another factor to consider when assessing your potential revenue. Also, some condo units with rental programs charge double the HOA fees if you choose to stay in the unit instead of renting it out to guests.
Finally, the resale market can be tricky since single-family homes are more attractive to property buyers. But if you can time when to sell your condotel unit, you might be able to get a good resale value for it.
Is it smart to buy a condotel in Las Vegas? The answer depends on your investment goals!
If you want to expand your investment portfolio, it’s smart because the Las Vegas real estate market is continually growing, and there is a high level of demand. However, you must be aware of the potential drawbacks of this investment to ensure that you can maximize your profit margin and that you can weigh in your options (versus some other forms of real estate investments).