My wife and I are interested in purchasing some investment property. Both of our parents have done well with their Condo-Hotel (Condotel) purchases. My in-laws bought one on Maui a few years ago and it has doubled in price since then. My Mom and Step-Dad bought on in Keystone, CO and it has done well also. Seems like this is still a developing market. I admittedly don’t know that much about real estate, but it certainly interests me. Donald Trump has several in the works around the globe.
I have been checking out websites and there are several Condotels that are planned for Dubai as well as other parts of the world. Interestingly the ones in Dubai have the best entry-level prices. Any idea why this would be? Does anybody have any insight on Condotels?
This is one in Dubai that really interests me http://www.condohotelcenter.com/condo-hotels/non-us/cube.htm I will be in Dubai next spring as we will be pulling into Jabel Ali a couple times during our deployment. I’m definitely going to be checking this out? What worries would you have about investing in Dubai?
I agree, it’s a very cool looking property. There are others there that look very nice as well, all located near the Sports City they are building there? They all seem “reasonably” priced for the entry-level units, starting at $109K and up. There must be a catch.
I don’t know anything about Dubai, but condo hotels are pretty hot now. My boyfriend had one in Waikiki for a while. It was great- we could reserve it whenever we wanted to use it for. I’m kinda bummed that he sold it.
I would wait a little on it. Dubai is obviously growing rapidly out of the sand, and the site of some remarkable development efforts. That said, I read some article awhile back that suggested that the building boom was grossly in excess of any reasonable expectation of demand. That is, Dubai isn’t the Cote D’Azur so you have to temper your expectations for how big a center it can be. Then again, the Middle East has been a trading hub since the dawn of man.
You obviously understand as well as anybody the dangers of investing in areas of regional instability. Its a low probability risk, but admittedly a high impact one - total loss. Something to consider.
What is the difference between a condotel and a timeshare or fractional ownership? I’ve had a timeshare for Christmas week in Vail since 1984 and it really hasn’t increased very much in value - maybe doubled in over 20 years.
I think Dubai is a good place to invest. Tiger Woods has agreed to lend his name to a huge golf/hotel resort with a lot of high end properties, which may make the lower cost ones more attractive.
Dubai is the Las Vegas of the Middle East. Many Kuwaiti’s jump on a plane Wed. night to spend their weekends enjoying the debauchery that is prohibited in their home country.
Also, Dubai is becoming the the business hub of the region.
If you do it I would suggest puting more than 20% down. That way there is less of a chance to end up in a negative equity situation if the market drops out (due to some crazy country in the region getting nuke happy). Please get professional advise however, as I know very little regarding Dubai, let alone investing in real estate over there.
Condotels are only a good investment in resort vacation destinations like Maui or Keystone. Look for places like Vail, South Beach, and other locations like that if you are wanting to invest.
There was a good article in the Chicago Tribune last summer. Basically, they aren’t doing as well as the industry thought they would.
A condo hotel is basically an attempt to sell at retail that which is normally only available wholesale. The idea is to get a retail markup by selling one hotel room at a time rather than selling the rooms wholesale as a complete hotel.
If you look at it that way, clearly the economics of buying the single room are going to be much worse than the economics of the project overall since you will be fragmenting ownership and paying a higher unit price.
I wouldn’t touch such an investment when it was “hot.” I would only buy that kind of investment when it was cold and people were bailing to get out from under the carrying costs. I would never buy as part of a big Donald Trump type hype. I would wait until the developer was gone, so that the market dried up and people start dumping.
I sold my apartment project 1.5 years ago to a condo converter. The people who bought the units when the market was hot and the converter who still owns some of the units are taking a bath. If you wanted to buy one of those units, I figure about a year from now there will be blood in the streets. That would be a good time to buy.
The expected return on the Dubai property would need to be considerably higher than the expected return on a similar property in a better established vacation region to compensate for the greater uncertainty with respect to occupancy rates, real estate value, and repatriation risk. If you consider this only to be an investment property, you should do a free cash flow analysis and make certain that the property is expected to earn a rate higher than its cost of capital. The FCF analysis can also help you identify the key risks/assumptions. If you don’t know what I’m saying, find someone with a business degree to help you.
I will readily admit that I don’t exactly know what an FCF is. I am signing up for some distance learning business classes and a real estate class while on deployment. Both my wife and I are really opening our minds to increasing our “financial literacy”. We just started reading Robert Kiyosaki’s book “Rich Dad, Poor Dad” and it has been pretty eye-opening. Thanks for your thoughts.
Interesting, thanks. I’m going to have to do some more digging. My wife and I are just beginning to look at options for active investing. We have been very passive up to now. My in-laws have done very well in Maui, more than doubled in value in the last 3-4 years. Not sure how my Mom’s place in Keystone is doing.
