Lazy Real Estate Investment - Condotels - Lazy Investing Way

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Wednesday, November 15, 2017

Lazy Real Estate Investment - Condotels



The Philippines’ booming economy and thriving tourism has made it one of the hotbeds for rental property income. As compared to mutual funds, stocks and other facilities which are intangible, volatile and has no capital protection, owning a condotel unit is a titled hard asset which is sure to dramatically rise in value in the coming years apart from providing a recurring income.

The way to earn in real estate is through either asset price appreciation and/or rental income.

However, if you built your own apartment or compound complex, or bought a condo unit that you want to rent out, then you may have to do everything yourself.

  • Collections - This includes doing background checks on prospective renters to minimize the risk of bad/runaway tenants.
  • Marketing - Depending on the location, you can market it to students, professionals, through traditional means or AirBNB.
  • Maintenance – Building and interior maintenance (plumbing, lights, paint, furniture..etc..)


While a condotel on the other hand is more straight forward. Research the company, location and then invest. Let the management take care of the rest, while you wait and collect your share of the profits. This is why I consider Condo-Hotels as a form of Lazy Real Estate Investment.

Like any other investment, pros and cons should always be considered.
PROs

  • Condotels are managed like a standard hotel. Owners are getting their earnings hassle-free from the property investment because it is the hotel operator that manages the maintenance of the unit and the rental deals.
  • Perks, rewards - unit owners will get various perks and rewards, which will include a fixed-number-of-days free use every year (This may vary per property development). 
  • Passive Income – The profit sharing may vary: it could be a 40-60 or 30-70 gross sales split after taxes, equally divided among unit owners and will be paid on an agreed frequency (monthly/quarterly), which is credited directly to the unit-owners’ bank account.

CONs

  • The earnings may not be as high as the forecasts since hotels are subject to market factors such as: natural disasters, travel advisory on the area, terrorist threats, and so on.. which will affect occupancy rates.
  • The maintenance fees are higher than most condominiums due to the built-in management and other fees that can be imposed later --that is beyond your control as well.
  • Like all other investments, there’s risk involved. Not all condotel developments can keep their forecasted incomes and promises. Knowing the tourism market, location, and property management firm will help mitigate such risks.

OPPORTUNITIES in tourism occupancy - Here in Cebu

  • The Provincial Tourism Office (PTO) reported an increase of 29% of tourist arrivals for Cebu.
  • Cebu is the hub for Central Visayas leading to: Bohol, Siquijor, Negros, Iloilo, ..etc..
  • Big events and MICE: for the past 3 years, Cebu has hosted various major international events such as: APEC ministerial & ASEANl meetings, International Eucharistic Congress, Miss Universe preliminary events, to name a few.
  • Visiting domestic and foreign travelers as well as IT-BPM industry corporate clients 


At the end of the day, it’s still about location(x3) and conduct due diligence & research. Additionally, invest in the company that is transparent in their income and is willing to give you the real picture.

“Landlords grow rich in their sleep.” – John Stuart Mill

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We have another leg of Ticker & Trends and CERTA’s “INVESTABAI” Easy Stock Market Investing workshop this coming November 25!  Register here: https://tinyurl.com/yabj8gx7
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