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Safety Meetings
Feb 4, 2008

My Instagram is blowin' up 24/7.
so just a bit of background, I work in a labor camp and i'm away from home 3 weeks out of every month. Mostly i've been staying in hotels on my days off, but i've been considering purchasing a property for investment purposes.

I found a condo, which although fairly small is quite a good deal. Around $150k to purchase and $350 a month in strata fees. Looking up the property, it's about 50% hotel, 50% executive style short term rentals for professionals. It's in a very desirable location, by the ocean and right on a golf course.

The one thing that puzzles me is that the places comes fully furnished, and the strata says they will rent the condo out for you while you are not using it. This actually works pretty well for me as I could rent the place out for 3 weeks of the month and just bring my stuff there when I want to stay.

Has anybody heard of these kinds of arrangements before? It sounds a lot like a timeshare to me although with full time ownership.

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BEHOLD: MY CAPE
Jan 11, 2004
Sounds like you are buying a hotel room. I suppose some questions you should have assuming you are basically ok with strangers living in your house all the time when you're out of town are:

1) Is this place going to pay for itself after you stop working in a labor camp and want to live somewhere else?
2) Are you going to have trouble selling it - how many other units are for sale and how long have they been listed?
3) How are the proceeds of the subrentals split - how much does it cost to rent the unit for an entire month, how much are you paid by the management company, and how much would it cost you to finance the unit for a month after taxes etc?
4) How have the fees changed over time and what say do you have in the condo ownership i.e. is there an association or is it just a corporate manager?

Elephanthead
Sep 11, 2008


Toilet Rascal
Are you buying it from the developer or from the resale market? I am not saying owning it is a good deal, but resale is way less risky since you are paying a closer to fair value price.

skipdogg
Nov 29, 2004
Resident SRT-4 Expert

We vacation every summer in Orange Beach, Alabama and a lot of the condos there are setup like this. They come fully furnished, and people buy them, and then the property management company can rent them out when you are not using them. I'm not sure on the specifics on the financials of the property management renting the unit (how big of a cut they get, who is responsible for what, etc.) but I've heard of this arrangement before.

I have no idea how the 'investors' make any money on them, but we sure do like staying in their nice condo one week a summer. We usually stay at the Caribe, where a 4 bedroom condo can sell for 800K or so. HOA dues run ~900 a month, I have no idea how these guys get a ROI at all.

SiGmA_X
May 3, 2004
SiGmA_X

skipdogg posted:

We vacation every summer in Orange Beach, Alabama and a lot of the condos there are setup like this. They come fully furnished, and people buy them, and then the property management company can rent them out when you are not using them. I'm not sure on the specifics on the financials of the property management renting the unit (how big of a cut they get, who is responsible for what, etc.) but I've heard of this arrangement before.

I have no idea how the 'investors' make any money on them, but we sure do like staying in their nice condo one week a summer. We usually stay at the Caribe, where a 4 bedroom condo can sell for 800K or so. HOA dues run ~900 a month, I have no idea how these guys get a ROI at all.
What do you pay for the rental period?

Perhaps it's not that the owners make money, but just reduce their vacation costs. It is quite likely that the ownership is not really a reduction in costs, but rather perceived costs, somehow, like timeshares. Without running the numbers or knowing the rental income rents, that is my assumption.

slidebite
Nov 6, 2005

Good egg
:colbert:

We have stayed at hotels/resorts like this. It's like a really nice fully equipped hotel room (sometimes even laundry), but privately owned. Basically like a condo development with a front desk, cleaning staff and a restaurant. Seems to work out well enough from the person just renting it for a night or two, but I'd be really curious to know how much of the nightly rental fee goes to the pocket of the owner and the insurance aspect.

I could really see this being easily abused by the rental "agents" playing favorites, renting out specific rooms all the time while yours just sits vacant.

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skipdogg
Nov 29, 2004
Resident SRT-4 Expert

SiGmA_X posted:

What do you pay for the rental period?

Perhaps it's not that the owners make money, but just reduce their vacation costs. It is quite likely that the ownership is not really a reduction in costs, but rather perceived costs, somehow, like timeshares. Without running the numbers or knowing the rental income rents, that is my assumption.

Last time we went it was for 5 nights and was just under 1500 dollars plus 185 dollar service charge and taxes of about 160 bucks. All told right around 1850 dollars for 5 nights. We split that between 3 couples though so it works out great for us.

The rates change during the different months though. We went the week after labor day, so it was a little less expensive. July 2015 rates for the condo we rented are 588/night. Best case scenario the owner books the entire 31 days of July, they could clear 18K gross. Assume a more reasonable 80% occupancy rate, or 25 days, you're looking at 14.7K gross.

I would guess peak season for the are to be the last 2 weeks of May through the first 2 weeks of September, which is roughly 122 days long. Assume 85% occupancy and 500 a night gross, it's 48.8K in gross revenue. I'm not a real estate investor, not sure what the numbers folks look for when dealing with this stuff, but I would guess you could break even over the year as long as your unit rents well and you're not mortgaging the entire 850K purchase price.

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