Here’s the definition I found on the Web:
Customers purchase fee-simple equity in the units - the hotel's guestrooms. Unit owners may live in the hotels permanently or use them as second and third homes. Depending on the hotel's policy, unit owners may rent their units independently or through the management company's rental program and derive income through a revenue-sharing arrangement. Unit owners also incur budgeted maintenance and operating expenses. Depending on the management company, unit owners have varying degrees of access to their hotel's amenities and services.
We sell condo-hotels in greater Daytona Beach Area and here are a few things buyers need to understand when buying a condo-hotel. First and foremost, for the most part there is no financing. So it is all cash. Now that we are done with financing (or lack thereof), we can move to buying a condo-hotel.
Association fee (aka Maintenance fee). It has nothing to do with rentals, and is due whether you are in the rental program or not.
Property tax is NOT included in the Association Fee. You pay it separately.
Each Condo-Hotel has a Master Insurance policy maintained by the Association (and therefore it is part of the Association fee), however damage to the room is not covered by it, and you need your own insurance for the unit, which includes liability and content (HO-6 policy)
There may be (and will be) Special Assessments, which is the way for the Association to pay for any expense which was not budgeted and for which there were no reserves. You may foresee it (deteriorating physical condition), or it may be a surprise (a lawsuit not covered by the Association Insurance).
Expenses ARE guaranteed.
You Have to pay Association Fee, and the amount may increase and is not capped.
You Have to pay taxes and the amount of tax may increase.
You may be faced with Special Assessment tomorrow or in 10 years
Income is what you get as your share of rental revenue for your room.
Income is NOT guaranteed.
Last year income is not a guarantee of next year performance. It may be affected by factors under your control (how you use it, and alterations that you make to the unit), and by factors not in your control (economic slowdown, obsolescence of the condo-hotel and of the area, change in vacation patterns, etc).
Income may or may not cover your Association fee plus Taxes and in Daytona Beach area will not be enough to cover mortgage.
With few exceptions I would not consider rental income. Consider future resale value. Even if you will have to chip in $40 a month to break even, and you will have to wait 5 years for the market to rebound, if you buy a unit for $35K, and will sell for $120K, you would have spent $40K, and would get over $70K after all expenses are paid.
In Daytona Beach it worked perfectly. I do not know about other places. But I know a thing or two about our Daytona Area condo-hotels.
After all, real estate is local.
* Image courtesy of miamism via Flickr.com