What is a condotel?

WHAT IS A CONDOTEL
To better understand the concept of a condotel, I 'd like to explain a
little about condominiums and condominium buildings. Each condominium
building/project has a Declaration of covenants as well as Bylaws. This
document articulates all the rules and regulations related to that
Condominium by which all owners agree to abide by. These rules and
regulations include but are not restricted to topics such as common area
use and maintenance, governance, parking, whether pets are allowed or
not, and most relevant to this topic, whether condo owners are allowed
to rent their units to others and for what minimal periods of time. For
example, these rental restrictions can range from no rentals allowed, to
minimum of one year at a time, to minimums of 6 months or one month, or
two weeks or one week or in for one day at a time. All owners in that
condominium must adhere to these rental restrictions.

A condotel is a condominium with a rental restriction of 'one day'. In
other words, owners may rent out their personal units for periods as
short as one day at a time - like a hotel. Owners are not required to
rent their units at all if they do not wish to do so but they are
allowed to in accordance with their 'Condo Docs'.

RENTING A CONDOTEL
Most Condominiums (represented by a Board of Directors) with short-term
rental restriction enter into a contract with a rental management
company to manage the rental program in that complex. The Rental
management company subsequently enters into a rental agreement with
individual unit owners who wish to rent their units to the public. This
rental agreement establishes the terms such as the percentage of revenue
to be earned by the owner. For example , it is not uncommon for the
gross revenue to be shared by the unit owner and the Rental Management
company 50/50.

In all other matters, owning a unit in a 'Condotel' is little different
from owning a large three-bedroom condo or in fact a single-family
residence in a community with shared amenities. The unit/home owner
legally holds the deed to the condo with all the rights, privileges and
responsibilities therein.

LIABILITY
So, in answer to your question, 'what happens to the condo unit if the
'hotel' goes bankrupt', the answer is 'nothing' except that the rental
agreement between the owner of the unit and the rental management
company is now null and void. The Board of Directors will now have to
find another rental management company to manage the 'hotel' for that
condominium.

INSURANCE
In answer to your second question regarding insurance, each condo
association must pay for insurance for the building, roof and common
areas. This expense is built into the monthly maintenance fees paid by
each unit owner. Increasing insurance costs have resulted in increases
in monthly maintenance fees. The average increase has been about $100/m
per unit. Condo maintenance fees can now range from $160/m to $900/m,
but include other shared expenses such as water sewage, landscaping,
cable etc. Unit owners are responsible for insuring the contents and
interior of their own unit. This also includes liability if it should
be rented. The cost for this insurance also ranges depending on the
extent of coverage purchased (similar to a single family home owner).
However, as an example, condotel insurance currently costs about $200 -
$600/year.



PROPERTY TAXES
Contrary to what many foreigners believe, the property tax system in
Florida is NOT punitive to foreign buyers. The Homestead exemption
serves to reduce taxes for primary residence owners - including foreign
buyers. If the property is not a primary residence then no reductions
are applied - including Florida residents. In other words, the same
tax rate applies to all property owners of second homes, regardless of
who they are. A Florida resident will pay the same taxes on their
second home (eg condo) as you would as a foreign buyer.

The formula for calculating taxes is based on the assessed value, (which
is calculated annually by the property appraisers office), and the
millage rate for that city. As a general rule of thumb, it is
approximately 1.5% - 2% of the purchase price of the property. Property
taxes on a $200,000 property will be approximately $3,500/yr.

FORECLOSURES
The process for acquiring a foreclosed property in Florida does not
involve specific representation of a financial institution. Financial
institutions are not in the real estate business and wish to release
themselves of real estate holdings as soon as possible. As a result, as
soon as they are in a legal position to dispose a property, they secure
the services of a Realtor who is required to market the property through
the MLS system as any other property. As a result, the only way to
purchase a foreclosed property is through the listing agent on MLS
system. Financial institutions will not negotiate directly with a
buyer.

CONDOTEL AVAILABLILITY
There are currently 279 ocean front condotels available in the Daytona
area ranging in price from $40,000 to $459,000! Sizes range from 250
sq ft to 1,700 sq ft., age ranges from 1965 to 2006, some are direct
ocean front facing and some face parking lots, some are renovated, some
are original. Other factors to consider are location, rental management,
and association management, condition of building, condo restrictions,
as well as personal appeal. Condo selection will also depend on your
goals - is maximum revenue important or less so?