BluefoxToday blog : Las Vegas condo-hotel market cooling

Las Vegas condo-hotel market cooling

 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.

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Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Comment balloon 13 commentsEsko Kiuru • May 25 2008 04:19PM

Comments

Esko,

The onlt thing I know about condotels are that they are usually hover right below 600 sq ft and they are hard to get financing for. I almost bought one considered a condotel but I checked to make sure it would appraise based on the comp back then. I was smart not to purchase it only because I didn't want to be stuck paying cash or losing my deposit so I backed out.

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) about 11 years ago

Esko,

Of course, the buyers knew what their cost could be, they had a fully prepared Prospectus, whihc outlined everything, ecept the rental income. The developer could not elaborate on any rental income, as it would then constitue the income derived from the efforts of the third party and thus make the sale of condo-hotels not real estate, but the sale of securities, which requires a different license and is a totally different ballgame.

So, rental income the buyer might not know, as the law did not allow the developer neither to promise, not to warn against.

The rest, as property taes and maintenance fees the buyers knew.

 

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) about 11 years ago

Esko I knew that this concept was popular in Florida but had not heard much about it anywhere else, in fact I don't know of any around here.

Let's hope that the bleeding stops soon and we can get back to the good times.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 11 years ago

Neal,

Before buying one of them, fully understand the concept is my advice.

Posted by Esko Kiuru about 11 years ago

Jon,

Thanks for expanding on the concept for the reader's benefit.

Posted by Esko Kiuru about 11 years ago

George,

It made a major landing in Las Vegas a few years ago and now it's going through some growing pains.

Posted by Esko Kiuru about 11 years ago

Working on financing for a condotel.  Any ideas on a lender I can use for one in Las Vegas?  

Posted by Michael C. Lewers, Senior Home Lending Advisor (JPMorgan Chase Bank, NA) almost 11 years ago

Michael,

Are you licensed to lend in Nevada?

Posted by Esko Kiuru almost 11 years ago

I am trying to cash out a condo that used to be considered a condo but now is considered a condotel.  This is because of the new guidelines saying that anything that can rent for less than 7 days is considered as a condotel.  Any advice on lenders that can do this would be greatly appreciated.

 

Matt

Posted by Matt White almost 11 years ago

Matt,

A lot depends on the project you have the condo in. Frankly, the market is pretty tough right now for cash-outs. If you like to pursue it, call me at (702) 499-1006 and we'll discuss your situation.

Posted by Esko Kiuru almost 11 years ago

Esko,

 

Now that there are a lot of condotels that are near foreclosure, how do you think is the right valuation/appraisal for that kind of property?

I don't think 50 cents to the dollar on the price set in 2006 is profitable.

 

If you will put an offer on a condotel, how much would you offer?

 

Ernie

 

 

 

 

Posted by Ernie over 10 years ago

Ernie,

Establishing value for condo-hotel units is tough now because there basically is no sales data to use. Probably lower than 50 cents to a dollar. 

Posted by Esko Kiuru over 10 years ago
It's an unfortunate siuttaion, and the people telling you that you have no options are probably not correct.The fact that you pay on time does reduce the urgency that the bank feels towards working with you though.I'm in the mortgage industry but I recently met a lawyer who deals exclusively with loan modifications all over the country.Email me if you want, and i will forward his contact information to you. He will give you a free consultation and let you know if he thinks he can help you or not. It's probably worth your time to explore having a professional help you out of this mess, as the results they get can be a lot better then the results you can get on your own.edit: Also, just FYI, if you stop paying the 2nd, it will ruin your credit, but they won't foreclose. Since the first mortgage will get paid first, the second mortgage holder really has no recourse against you except to put the bad marks on your credit report.
Posted by Jelan almost 7 years ago

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