Condominiums that can be doubling as hotel rooms was introduced a few years ago as a new concept to Southern Nevada, likely migrating here from Florida where it had already seen quite a bit of success. Vegas being such a hot-spot tourist magnet world over proved to be a fertile ground for the idea. Developers quickly realized the opportunity and were soon elbowing their way to authorities to get building permits. A frenzied housing expansion was already gathering steam in town when this phenomenon was discovered and what it did was add a smaller side boom to merge with the larger general boom.
All good booms come to an end one day, though, as the single-family house and townhome segments in Las Vegas have already proved with their soft performance of late. Now it's the condo-hotel's turn.
Overbuilding is a significant reason to the current decline in the bazaar. Boom years as a rule keep attracting adventuresome builders to the scene well beyond the actual need who will eventually saturate the market with too much product and it'll tank. The weak national economy hasn't helped any either in this case.
But there is another intriguing reason to the sector's present dilemma and that is the condo owner. When he purchased one of these units he thought he had made one of the better investment decisions of his life. When he wasn't using it he could have the hotel rent it out for extra income, predictably cover the mortgage payment and perhaps leave some extra for a gourmet meal, too.
However, the owner in many instances failed to understand, or wasn't informed about, how much he would have to pay for the marketing and management fees and the condominium's maintenance. Those numbers often eat up all of the rental income and can actually get worse than that. Much worse, to the tune of putting him several hundred dollars in the red each month. That's one thing. To add insult to injury, the current real estate slump here has also phased in declining property values to the picture and now he is really feeling the pain. Negative cash flow and upside down on the mortgage isn't much fun.
As a result, some owners are walking away from their investments, letting them go into foreclosure. Some are frantically trying to sell, even at a loss. Some are hanging in there and are seeking to rent them out on their own, bypassing the expensive hotel setup. And of course lenders are aware of the dire situation and now are very cautious about providing financing for these once-popular units, whether resale or new.
Yet, as always, in time a full recovery will sweep into town and once again spawn a stable condominium marketplace to work with.