Monday, April 7, 2008

Condotels = Pets.com?

Thanks to Deal Junkie for pointing this out.

The Journal had a story the other day that compares condotels to dotcoms that crashed a few years back. I took a pass a year ago on the concept. And that was not the first time either. I remember look at condotels at a resort in Scottsdale back in 2001 and again in Florida in 2005.

Why did I look? A friend was doing well with one in Orlando but that was back in the earliest of days. Something just did not seem right about the whole thing. Finally, a savvy real estate agent told be to be very careful about this, to the detriment of her commission(!)

And my spider sense may have been right this time. These are great for developers because they get the money up front which allowed them to get construction financing. Great mitigation of risk. And the management company still keeps roughly half the revenue as a management fee, so they make out all right too. The losers? You guessed it. All the risk of a down market is shifted on to the individual unit owners.

Will there be litigation? You betcha.

How many times do you have hear this? If it sounds too good to be true, it probably is.

The only upside? If I make some money this year and next I might be able to pick up some stuff on the cheap. That's not too good to be true.

2 comments:

Bob said...

If it sounds too good, it probably is.

Truer words were never spoken. We seriously thought about doing one in Naples, FL back in '01. In what's now called one of the most overpriced markets in the U.S. Whew!

David Stejkowski said...

Thanks for your comments and your blog post. FWIW, I did have a broker's license for a while but never used it.

 
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