Plaza Resort & Spa in Daytona Beach is in the spotlight today. Prices are low, but people still keep asking this sacral question "What is the worst thing that may happen to a condo-hotel?"
I often think that if my buyers could buy a condo-hotel for only one dollar, they would still want to make sure that they can not lose.
Mentioning a dollar has reason. Because the answer really depends on what you paid for it.
Let us take Plaza Resort & Spa as the example. This is right now the only condo-hotel where there is a lot of activity because of the gap between what people paid for units in January-February 2006 and what the units are sold for now.
It is not a surprise, that people, who paid $350K to $400K for a unit in Plaza Resort & Spa, especially if they used a preferred lender with 10% down have to pay $2,500 to $3,200 a month in mortgage payments. When they see that there were unit for as low as $34,500, they clearly understand that they will pay that amount in one year in their mortgage, and they also understand that it may take way more than just a few months to warm up the Real Estate market to the prices of 2006. So, they are stuck. If they keep paying, they will have paid maybe over $100K in monthly mortgage payments, plus they have bought it at the peak of the real estate market, so it is not that waiting will allow them to recoup their investment reasonably soon (add what they bought it for to the mortgage payments), so them dropping the units and walking away is not a surprise.
Surprise is the today's price. But in a slow market people are cautious, and are afraid of jumping even on once in a lifetime opportunities.
So, what is the worst thing that may happen to a condo-hotel? I do not know. However, I assume that disappearance of the building should be this worst case scenario. So, let's consider disappearance. Hurricane is an unlikely candidate, the building initially was erected in 1911, and had a few chances to be blown off, and it is still there. Let's assume that fire renders the building to a pile of rubbish.
There is insurance. I have no idea what is the insurance on a building like that, but I think that there should be a very sizable policy on a property where renovations only ran hefty $70 Million.
Anyway, the insurance is supposed to cover replacement cost, and this should be a significant amount. I know that when a similar thing happened to Rodeway Inn, the insurance proceeds per owner were about $70,000. Rodeway was not a match for Plaza, and I would not be surprised if Plaza Resort & Spa would see double that per the owner.
So, here's the answer. People, who paid $300K will lose, and people who paid $50K will not lose. Maybe this would be less than what they would like to get if they sell at the peak of the market, but at least, they will not lose money.
This is one of the reasons I find buying in Plaza Resort & Spa a bit safer.
So, if you are interested in Plaza Resort & Spa in Daytona Beach, you can get a free phone consultations at 386-405-4408.
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