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A condotel is a mix between a condo and a hotel. It allows buyers to purchase real estate but rent out that real estate as a vacation space or hotel when they are not using it. In this way, the condotel actually makes money for the property owner when the owner is not using it.
In order to understand the condotel concept, it is important to understand a little bit about how real estate works. Most everyone has stayed in a hotel. The hotel owner, usually one person or business, rents out rooms in the hotel for a fee. People rarely live in these rooms full time.
Meanwhile, condos are generally sold as homes or second homes. Buying a condo is like buying a house. The owner does not pay rent to anyone. The intention behind the condotel is to mix these two forms of real estate to make something that is the best of both worlds. They have all the luxury of a hotel, but the buyer owns them outright.
The condotel concept started as a way for hotel companies to fund new hotels. Building a hotel is expensive. Instead of building the hotel first and then allowing people to rent the rooms, condotel owners sell the hotel rooms and suites as though they were houses in a housing development. The hotel companies get money to fund their building, and the buyers get all the luxury of a hotel without having to move out at the end of the week.
Owning a condotel gives the buyer all the perks of staying in a hotel of the same brand. So the buyer gets room service, maid service, and a concierge. He or she also has use of all the hotel amenities like the pool and fitness center.
Another advantage of owning a condotel is that the room can be rented out. If the owner plans to be out of the country for a week or two, the hotel can rent out the owner's room at normal market rates. In exchange for making the booking and managing the space while the owner is gone, the hotel gets to keep 20 to 40 percent of the rental profit.
There are some drawbacks to this sort of investment. No one can guarantee that the owner will make money through the rental process. After buying the room, paying any maintenance fees, and giving the hotel its percentage of the rental, there may be little money left. Also, local laws may prohibit the owner from living in the hotel for more than a certain number of days every year.