Heard all the buzz about condo hotels? Ready to explore this type of vacation home product? Then be sure you understand what’s involved.

While many people see condo hotels as investment tools, developers, in accordance with Securities Exchange Commission regulations, sell them only as real estate. They suggest that you focus on the benefits of owning a luxury home that usually comes complete with four-star or higher hotel services and is located in a highly desirable vacation destination.

Rent Revenue Offsets Your Costs

While it’s true that one of the key benefits of owning a condo hotel unit versus a traditional condo or vacation home is that you’ll receive some rent revenue when you’re not using your unit, cash flow should not be the main reason to buy. To set realistic expectations, think of the revenue generated by your condo hotel unit in the rental program as helping to offset your costs.

Buy in Pre-construction to Maximize Appreciation Potential

As for potential appreciation, like any real estate, if you buy at the right time in the right location, you can make money. In the case of a condo hotel unit, buy in early pre-construction stages and you have the best chance of realizing appreciation when you eventually sell.

That’s because as the condo hotel is being built, developers implement planned price increases at various stages of the selling process. Plus, real estate in great locations has historically appreciated over time.

Keep in mind that your actual profit, of course, depends on the general market conditions, interest rates and competition.

Is Flipping Allowed?

Can you sell before closing? While flipping was a common practice a few years ago, today most condo hotel developers do not allow investors to sell before closing on their unit and clearly state this item in their contracts. They don’t want to compete with you to sell their remaining units.

Nonetheless, if you buy a quality property in a good location, you could end up with not only a great second home but a real estate investment that appreciates with time and will net you a profit when you sell.

About the Author:

Joel Greene is the President of Condo Hotel Center located in Miami Florida, which specializes in the sale of condo hotels. Visit his web site, http://www.CondoHotelCenter.com to see condo hotel listings, photos and prices. You can also sign up for his free Property Alert newsletter to be notified when new condo hotels come on the market.