Understanding Condo-Hotels In Daytona Beach. Condo-Hotels vs. Condos. Special Assessments is the 5th post in this series. Previous posts are:
Understanding Condo-Hotels In Daytona Beach. Condo-Hotels vs. Condos. Living and Renting
Understanding Condo-Hotels In Daytona Beach. Condo-Hotels vs. Condos. Management
Understanding Condo-Hotels In Daytona Beach. Condo-Hotels vs. Condos. Safety of your Investment
Understanding Condo-Hotels In Daytona Beach. Condo-Hotels vs. Condos
The dreaded Special Assessments. A horror story of condo (and condo-hotel) living. So what is a Special Assessment? Basically, it is a very simple concept. If there is something that needs to be done, which cost money, and there is no money to pay for it, that cost is distributed among the condo owners proportionately.
So, if this is just a matter of paying for something that was not budgeted or was not sufficiently budgeted, would there be any difference between the condos and condo-hotels?
Surprisingly (or, maybe not) the answer is "yes". So how come?
There are several reasons for that in the Daytona Beach area.
1. Except for the Ocean Walk Resort, the rest of the condo-hotels in Daytona Beach area were not built as condos, they were hotels, that were later converted to condos. The overwhelming majority of them were converted on a shoestring budget, often using shoddy contractors, cheapest materials, and every corner was cut.
2. Having a rental component causes more tear and wear, than in residential condos, thus making need for repairs more often.
3. Trying to cut costs, and under pressure from owners, condo-hotel Associations often wwaive the requirement to have the reserve fund beyond the one required to cover the gap specified by the insurance policy.
4. Condo-hotels are more open to lawsuits, which, along with the physical condition, are the reason for special assessments (paying lawyers in fights against the developer, the management company, etc.).
5. Condo owners associations are generally stronger in residential condos than in condo-hotels. In residential condos people take the issues closer to heart and are more involved in the decision making, thus providing more stability for the property. In condo-hotels owners do not live in their units, and often are out of state residents. They are unlikely to come to the meetings.
6. When the money is flowing, Special Assessment in Condo-Hotels do not look that scary, as rental income should help to pay for it. But betting on it is a mistake. None of the condo-hotels in Daytona Beach area is a real cash cow, and breaking even (without a mortgage) is already good. But in times when business is slow, and street in a tourist town are empty and there are fewer warm bodies to put in hotel (or condo-hotels) rooms, the prospect of special assessments does not sound very encouraging. While residential condos are not immune to the recessions, and have owners stopping paying their Association dues, this is nowhere close to what is happening in condo-hotels. People do not pay maintenance fee. They are angry that there is no income, so some decide to stop paying as a business decision, some just can't afford it, as they have other troubles somewhere else.
So what happens when people do not pay their dues in daytona beach area Condo-hotels? The Association still has to pay the bills. And there is not enough money, because of those who did not pay the dues. Yes, the association will be forced to assess the paying owners to cover the shortage. In condo-hotels that creates a vicious cycle. Because more people stop paying. This is still unfolding, and we do not know where and how it will end.
This is one of the reasons why our advice is always: If you can afford a residential condo, go for it. A less expensive alternative like condo-hotels allows you to buy for less, but you pay more later.
If you are in the market for a condo or a condo-hotel in Daytona Beach area, call me on my mobile: 386-405-4408 and we will make sure you are not going to get hurt by a Special Assessment.
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