Should investors spend their money in condotels?

By Kieu Mai - Aug 04, 2018 | 10:25 AM GMT+7

TheLEADERGeneral Manager of Novotel Phu Quoc Resort Lee Pearce said that there are several pitfalls and advantages when investing in condotel.

Should investors spend their money in condotels?
General Manager of Novotel Phu Quoc Resort Lee Pearce

According to Lee Pearce, in basics terms, condotels work in the fashion whereby an investor buys a condominium in a hotel building and then, allows it to use the unit for guests when the owner is not in residence.

The sales pitch usual offers a guarantee tern and then, suggests the buyer will recoup investment costs and fees through the daily rental of the condo unit by the hotel.

The general manager of Novotel Phu Quoc Resort warned that there are several pitfalls that buyers should be aware of prior to an investment.

Firstly, developers made all kinds of promises but after completion and sale of units, they just handed the building over to a manager, which tried, often without success, to fulfill all the exaggerated promises. They were mostly concerned about getting the capital to build with almost no regard as to how investors might recoup some of investments.

Secondly, unlike other real estate sectors which are suffering from capital and financing problems, the market for condotels was flat-out overbuilt and that takes years to correct.

“Even if you wanted to buy into a condotel today, it’s doubtful you could find a bank that would finance this loan. Lenders have come to view a condotel mortgage as a high-risk investment. Unfortunately, if you actually own a condotel unit, lack of financing is a key factor that drives down pricing,” emphasized Lee Pearce.

He noted that it need strong governance controls monitored by central governments and there will be more notable upsides of investment.

Lee Pearce shared that one of these pros is hassle free landlord, which means “you do not have to be worried about anything since management will take care of everything.”

“Condotels can be used for your personal vacation, saves you accommodation costs and if the condotel is chosen carefully, you can take advantage of appreciation of value,” said he.

“In my personal assessment of global tourism trends such as unchartered destinations, community-focused hotels or new hotel technology, seaside developments of condotel style accommodation would fit hand in glove with the needs of this traveling generation,” general manager of Novotel Phu Quoc Resort emphasized.