Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Last year I was looking into buying what was called a "Hotel-Condo" property. Since I live overseas and will probably be over here for a number of years, I thought about buying what amounts to a hotel room. The deal was that I could use it for up to 6 months out of the year (no more than that) and the hotel would take care of renting it out the rest of the time. The deal seemed pretty good to me since we plan to spend at least 4 weeks per year in the area we were looking at and this way someone else handled the rental and maintenance issues.

Turns out the mortgage lender we use will not do a mortgage for that type of property in Florida. I asked them why but the agents I spoke with didn't know and I couldn't seem to find anything about it on the web. I was thinking that maybe it was due to many bad loans in Florida but without a definitive answer, it was hard to press on and look for another lender.

Does anyone have any experience with this? Oddly, if I wanted a Hotel-Condo in any other state it would have been no problem.

Calabogie
Print the post Back To Top
No. of Recommendations: 0
Last year I was looking into buying what was called a "Hotel-Condo" property. Since I live overseas and will probably be over here for a number of years, I thought about buying what amounts to a hotel room. The deal was that I could use it for up to 6 months out of the year (no more than that) and the hotel would take care of renting it out the rest of the time. The deal seemed pretty good to me since we plan to spend at least 4 weeks per year in the area we were looking at and this way someone else handled the rental and maintenance issues.

Turns out the mortgage lender we use will not do a mortgage for that type of property in Florida.


I don't have experience with "Hotel-Condo" per se, but it sounds similar to buying a condo and putting it on the vacation rental market with a management co handling all the details. You would get an investors mortgage for that kind of property. I will send this on to the mortgage person I most respect on the Real Estate Investing board and see if he can't drop by to answer your question.

When it comes to vacation rentals, FL can be tricky. From what I understand most municipalities require licensing, and charge a short term occupancy tax on rentals of a long duration relative to what other states require. Also, if you are going to use your property more than 2 weeks or 10% of the time rented, which ever is greater, you will lose many of the tax benefits of owning a VR.

Thanks for posting!

IP
Print the post Back To Top
No. of Recommendations: 2
Hi Calabogie & IP,

What you are referring to is known in the mortgage world as a "Condotel" and it is a classified as a "unique property" and it requires a special loan program that very few lenders offer today.

This is definitely one of those cases (right along with log homes, sod homes, sky-rise condo units, subterannean units, floating homes, homes made out of old bomb shelters, etc.) where it makes more sense to hire a broker to do the searching. Its a question of finding a source to get it done at a reasonable rate & term... not shopping for comparable rates & terms.

Cheers,
Dave Donhoff
Leverage Planner
Print the post Back To Top
No. of Recommendations: 0
Thanks Dave. I knew we could count on you!

Calabogie, if you find that the Codotel is too expensive to finance, consider finding a conventional condo for your needs and hiring a manager to run the VR. If you are only going to be there for 4 weeks a year, you might just want to rent a VR instead. FL is overwhelmed with them right now, both legally licensed and not, because people can't sell their homes. Check out http://www.vrbo.com and homeaway.com for places to start, or just google FL vacation rentals using the name of the town you are interested in.

IP
Print the post Back To Top
No. of Recommendations: 0
Thanks Dave. I knew we could count on you!

And thanks from me as well Dave! Your info is much appreciated.

Calabogie, if you find that the Codotel is too expensive to finance, consider finding a conventional condo for your needs and hiring a manager to run the VR. If you are only going to be there for 4 weeks a year, you might just want to rent a VR instead. FL is overwhelmed with them right now, both legally licensed and not, because people can't sell their homes. Check out http://www.vrbo.com and homeaway.com for places to start, or just google FL vacation rentals using the name of the town you are interested in.

I'm still in the market for something in the Orlando area (preferably outside of the city) but the condotel doesn't sound like it's going to be worth pursuing. I might have continued looking into it but the fact that USAA said they would make a loan on that type of property ANYWHERE but Florida made me leery. Now with what you 2 have told me I'll be looking at other possibilities.

A conventional condo is what I would want as a house or even a townhouse would be too much for what we need. As for renting, we have done that in the past and will continue doing it but it just seems that with housing prices falling so far it might be a good time to pick up an investment property in that area. Sure, things could stay bad or even get worse but it's not like we have any other mortgage payments. We rent here in Germany but the rent and all utilities are covered by our LQA (Living Quarters Allowance) which leaves the salary untouched.

Maybe you can help with some other questions I have. I know nothing about hiring a management company to keep up a property. I assume there are reputable firms out there who can be verified through the BBB or some such but my concern is not only how much they cost but what I should expect from them. Obviously all of the outside work (painting or whatever) would be handled by the condo association but the upkeep inside the condo such as appliance maintenance, plumbing, electrical, etc. is a big concern to me. When we were younger we rented a number of places where the management company handling things just didn't do a good job. Some of them were supposedly reputable but they certainly didn't live up to our expectations.

One thing we have going for us is that our dauther and her husband live in that area (which is why we vacation there) so they could keep an eye on things for us. I don't want to rely on that too heavily though as it would be imposing on them.

Anyway, any tips or hints or general info you could provide would be greatly appreciated.

Thanks,
Calabogie
Print the post Back To Top
No. of Recommendations: 0
Maybe you can help with some other questions I have. I know nothing about hiring a management company to keep up a property. I assume there are reputable firms out there who can be verified through the BBB or some such but my concern is not only how much they cost but what I should expect from them. Obviously all of the outside work (painting or whatever) would be handled by the condo association but the upkeep inside the condo such as appliance maintenance, plumbing, electrical, etc. is a big concern to me. When we were younger we rented a number of places where the management company handling things just didn't do a good job. Some of them were supposedly reputable but they certainly didn't live up to our expectations.

One thing we have going for us is that our dauther and her husband live in that area (which is why we vacation there) so they could keep an eye on things for us. I don't want to rely on that too heavily though as it would be imposing on them.


My experience with rentals managed by a management co have not been positive. If you are letting them get your clients for you, there can be conflicts of interest if they also own some of the properties they manage. The management companies I've looked into charge 30-50% of your rent, PLUS fees to clean, maintain, check in on the place, etc. Changing a light bulb can be $75. Fees will vary based on location, and I again have no direct experience in FL.

However, due to the power of the internet, if you have some free time you don't have to be tied into a management company, particularly given that you have someone nearby for when emergencies happen. Setting up a listing has never been easier, and FL in particular has endless websites just for FL. People will come to you with their business, and you can hire someone to clean the property for you, as well as handle emergencies that arise. The employment scene in FL is not good, which means you should be able to find someone who really appreciates the job. This is the approach we will take if we ever manage to close on a property, though I certainly will have also evaluated the management avenue in case anything happens to me. DH has no desire to take this business on, and it will be our hit by a bus contingency plan. I fear the above makes self-management sound too simple, and it is not. It is much more complicated than this paragraph describes, because you are dealing with people and people can be unpredictable. It is however possible, and worth considering.

That said, if you are set on using a management co, and depending on when we finally secure our property I might do that for the first year while I ramp up my property specific marketing, let your fingers do the searching. Google rental management companies for the area, or even just look for a vacation rental in your area and you will be taken to websites of vr management co's trying to get your rental business. Check out the website, see if you think it does a good job marketing the properties. Google the management co website, and look at YELP.com to see if there are negative reviews. I'm not such a fan of the BBB, as what I've read about them is if you are not a member, good luck getting improper or resolved negative reviews taken off your record.

I am no expert in FL, and can only go by what I've heard, but FL has a lot of restrictions for VRs, many of which get ignored by illegal VRs who can then charge less, because they flaunt the rules. Personally, I wouldn't touch FL with a VR, unless I was interested in living there later. Because of the difficulty in selling homes, many properties have illegally converted to VRs, and the market is saturated. I'll see if I can track down LQuieros, who I believe has experience in this market, and ask her to address your concerns with greater authority.

IP
Print the post Back To Top
No. of Recommendations: 0
However, due to the power of the internet, if you have some free time you don't have to be tied into a management company, particularly given that you have someone nearby for when emergencies happen. Setting up a listing has never been easier, and FL in particular has endless websites just for FL. People will come to you with their business, and you can hire someone to clean the property for you, as well as handle emergencies that arise.

I am an "absent" landlord in that our seasonal property is in a semi-rural location about 800 miles away. To give a very high-level summary of what we did:
1. While there doing work on the property, called several local realtors, management companies, and put an ad in Craigslist looking for someone to act as onsite managers. The management companies were definitely the most expensive option, but also "one-stop-shops". Our ultimate goal was that because we had invested a lot of sweat, tears, and money into the property to renovate it and planned to keep it for years to come for our family, we wanted it to be taken care of by someone who would "treat it as if it were their own".
2. Interviewed several potential people in person. Found a local couple through the Craigslist ad that would be willing to manage, clean, and be general caretakers for the property. They are the 'front line' of contact for any renters at the property: they greet them upon their arrival and review the rules of the property, take calls from them for emergencies or general questions about the property or the area, help coordinate any services that might be needed, etc.
3. We have some vendors that we've dealt with in the past (property has been in family for several decades), others we found through recommendations of friends/neighbors or the local couple mentioned before.
4. I found several rental agreements online that were based in the state where we rent, crafted a Frankenstein of my own based on them (fairly extensive, too.. wanted to make sure everything was covered), then sent it off to a lawyer for review and updates.
5. Set up bank accounts to handle deposits and operating expenses of the rental. Set up a PayPal account to accept credit card transactions.
6. We list our property on HomeAway, VRBO, and I set up a website for the property as well. I had used a state-specific VR website the first year, but received 0 inquiries from it, so have not revisited. Inquiries seem to be generally split between VRBO and HomeAway.
7. Since then, I've been accepting the inquiries, vetting the potential renters, handling all the financial aspects, and coordinating activities with local vendors and our local caretakers/cleaners. Some days it takes more time than others, to be sure. Honestly I probably couldn't count the number of hours spent and late nights after getting home from work.. But I'd much prefer to have this hands-on approach to our property, so I know as much as I can about what's going on, what needs to be done, who's staying there, etc.

So far we've been fortunate (crossing fingers and knocking on wood) with getting great renters. Only one party that was suspect and apparently was completely oblivious to the fact that they were breaking some of our rules, but fortunately no harm resulted. We've only been doing it a couple years, but glad to see several repeat renters this year. Definitely makes it easier and less stressful!
Print the post Back To Top
No. of Recommendations: 0
Your approach is exactly what our plans are. When you look at paying 30% for a management co to find your tenants, managing that end of it yourself becomes a very attractive part time job. It can also potentially benefit you in terms of tax deductions, since you are considered an active investment and not a passive one if you meet all the requirements in addition to this one.

IP
Print the post Back To Top
No. of Recommendations: 0
I'll see if I can track down LQuieros, who I believe has experience in this market, and ask her to address your concerns with greater authority.

Hi IP - good idea for a new board. Our family's rentals are in Portugal, not FL, so I don't have any suggestions for that aspect of the OP's questions. We handle the management when we are there for the summer. The family handles it the rest of the year, so we haven't had to deal with management companies.

Laura
Print the post Back To Top
No. of Recommendations: 0
Thanks for tracking the board down, Laura. I was just getting the link again for you in response to your email.

I could have sworn you had some ties to FL. Now who was that...
I haven't been to Portugal since I was 16. I remember it being stunningly beautiful, and filled with wonderful, friendly people!

Hope you stick around and help make this board an active one!

IP
Print the post Back To Top