Reserve Study Versus Insurance Appraisal or PCA

Three relatively similar services are frequently provided to communities within the homeowners’ association industry. Because there is still some confusion over what each service represents, an Association can occasionally have expectations that far exceed the scope of a reserve study (the most superficial of the three services).

The three services are the reserve study, the insurance valuation (or appraisal), and the PCA (or property condition assessment, also known as the project condition assessment). In certain parts of the country, the reserve study is also typically referred to as an “engineering study,” which further adds to the confusion, as it implies a level of service not contemplated by a reserve study but more suggestive of a PCA.

What distinguishes these three separate services are their purpose, the methodology used in compiling the data, and the data presented in the final report.

The reserve study report is a budgetary tool based on a physical evaluation of the replaceable common area components of the Association. The purpose is to prepare a financial forecast( normally for a 30-year period) of future expenditures, and to understand the required reserve contributions to fund these future expenditures. In a condominium Association, replacement of the condominium structure itself is generally an excluded component, as it is considered to be a lifetime structure. However, painting of exterior walls, possible replacement of siding, and roofing replacement would be included in the reserve study, as they represent the major replaceable components that are part of the condominium structure. The reserve study is based on future replacement costs.

The insurance appraisal report is a valuation service of all of the common area components of the Association. This list of common area components will necessarily include a number of items that are not considered in the reserve study. The purpose is to determine the overall insurable values of the property, to make sure that the Association is carrying adequate insurance. For purposes of the insurance valuation report for a condominium project, the condominium structure is the single highest cost item included within the study. Rather than evaluating each of the separate components of that building (ie, building envelope, roofing, mechanical equipment, etc.), the insurance valuation is generally based on a cost per square foot for replacement of the type of construction used in the project. The insurance valuation report looks at current replacement costs as the basis of the valuation.

The property condition assessment (PCA) report is an overall evaluation of the physical property that results in a report to help interested parties understand the condition of the property. The PCA report should generally include the following elements, presented in a clear and easily understood format:

  • Summary of the property’s visible components, including site development /landscaping, exterior envelope, structural elements, interior finishes, equipment and systems, and handicap accessibility compliance
  • Details of any physical defects or damage discovered during the property inspection
  • Identification of any maintenance deficiencies
  • Estimate of costs for correcting observed deficiencies
  • Quality of workmanship
  • Quality of construction materials used
  • Statement of the terms and conditions of the report

The PCA can be viewed as a blend of both the reserve study report and the insurance valuation report.

First, like the insurance appraisal report, it considers all components of the property, not just the replaceable components. But unlike the insurance appraisal report, it does not attempt to arrive at an overall valuation for replacement of the project. The PCA is based upon current costs.

Second, like the reserve study, it should identify physical defects or damages observed, and provide an estimate of the cost for correcting the deficiencies noted. The PCA does not use future costs. Contact names and numbers of vendors supplying systems maintenance and replacement are usually included in the PCA.

What are the benefits of a PCA? It provides an expert evaluation of the quality of construction and the integrity of the related building systems, and identifies necessary repair costs to bring the project to a normal condition. Readers of the PCA report are thus provided the information they need to make critical decisions. For commercial real estate transactions, the PCA is very important to lenders and investors related to the potential purchase of real estate. Insurance underwriters use the report for setting rates. Within the homeowners’ association industry, the PCA may often be a guide to determining the scope of future repairs and possible replacement with alternative products. In a more extreme example (and we’ve seen this happen more than once), it may help the Association board of directors determine whether a particular building is salvageable through repairs, or whether it should be torn down and replaced. We have seen 40-year-old clubhouses that were not adequately maintained razed and replaced with new, multi-million dollar clubhouses. In some associations, aesthetic values also weigh heavily on such decisions.

Providers of PCA services are generally architects, engineers, or contractors that have extensive construction knowledge. It is necessary for the provider of the service to have an understanding of the latest industry standards on structural components. Familiarity with construction products and materials and knowledge of mechanical equipment, fire protection (such as sprinkler / alarm systems), lighting, and other interior systems are also important.

While it is desirable for a reserve study provider to have that same level of knowledge, the reserve study is a budgetary tool and as such, is a more superficial analysis that does not require the same level of knowledge. The reserve study report should be a reflection of the Association’s maintenance plan. Therefore, far more reliance is placed upon the knowledge of the Association’s operating and reserve maintenance activities, as well as interaction with the vendors that supply those services.

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Holding Effective Condominium Board Meetings

Evaluations work. A very effective practice for Board members is to evaluate the quality of their Board operations. Many times, Board members do not know what they do not know about their own Board. Board evaluations are mandatory in many for-profit industries. These Board members know it is critical to regularly conduct short, practical evaluations of their Board operations, and then act on the results of those evaluations during the year.

Evaluations need not take a long time — many times, even 15 minutes a year from each Board member to complete a short questionnaire, followed by half an hour to discuss results and plan a strategy for improvement.

Some boards may feel they do not need assessments. I would suggest that these boards complete the free Board assessment tool offered by BoardWalk Consulting. This assessment should also be completed confidentially. If your board scores anything lower than an eight on any of the five criteria, then it may be time for an evaluation to find and correct deficiencies in your operations.

Before you undertake the exercise to evaluate your board, make sure everyone is onside with this exercise and the first question to ask is, what are we evaluating? There are different assessments that can be completed, like board effectiveness or individual board members. Individual board member performance should never be evaluated until everyone has been educated on their role within the board. It can be demoralizing to be evaluated against criteria you were not aware was part of your responsibility. We will focus this article on board effectiveness as a whole.

Here are some sample questions to help evaluate your board performance. Have your board members complete the survey, and then summarized the answers. Instruct your board members that the survey should be completed quickly and with honesty, do not over think the answers.

Some points to consider before implementing the assessment.

1. Make sure your questionnaire is relevant to your corporation and the items you wish to measure. Your board members will lose interest answering irrelevant questions.

2. In order for evaluations to work, everyone must be open and honest. The only way to accomplish this is to ensure confidentiality in the questionnaire. Have an independent third party prepare the summaries.

3. Don’t try to be too comprehensive in your assessment.

Commit to acting on the results of your survey. These evaluations tools give an excellent picture of a board weaknesses and strength. Their power is proven. If there is no follow-up to these exercises, then they are simply a waste of the time and energy of your volunteers.

– Board has full and common understanding of the roles and responsibilities of members, management and staff within the corporation.

– Board receives regular reports on finances/budgets, products/program performance and other important matters.

– Board effectively communicates to the community.

– Board meetings facilitate focus and progress on important matters.

– Each member of the board feels involved and interested in the board’s work.

– The board members receive regular training and information about their responsibilities.

– New board members are oriented to the board, including a board operation manual, the corporations Declaration, By-laws and the Act, as well as their roles and responsibilities as board members.

– Board organization is documented with a description of the board and board committee responsibilities.

– The organization has at least the minimum number of members on the Board of Directors as required by their bylaws or the Act.

– The board has a process for handling urgent matters between meetings.

– The board has an annual calendar of meetings.

– Meetings have written agendas and materials relating to significant decisions are given to the board in advance of the meeting.

– Conflicts among directors do not interfere with the Board’s work.

– Our financial monitoring and control systems enable us to quickly identify errors and protect us from most criminal activities.

– I am proud to be a Director of this corporation.

The responses should ranked as simply “Agree or Disagree”, collected and summarized. I like to view the summaries in bar graph format.

These summaries for each question can then be used to determine if there is a problem in a particular area, and can also help prioritize areas to focus for improvement.

Condominium Corporations would do well to take note of the practices of boards in highly effective companies. While the industries may be different, the need for effective decision making structure is the same.

Condo and Apartment, What’s the Difference?

It is easy to feel a bit dazed and confused after a day of viewing potential new homes. After multiple viewings, they can all start to look the same. But have you ever wondered what the difference is between an apartment and a condo? They look exactly the same! If you have, you’re right. They are aesthetically no different from one another. The difference between an apartment and a condo is purely legal.

Condos and apartments are essentially both apartments that are part of a bigger building. Where a condo differs from an apartment is in terms of ownership. Condos are apartments sold individually to different owners. The same building in its entirety could be owned by one person and the apartments inside rented (but not owned!) to separate people.

A condo is typically defined as a group of houses that are individually owned on one piece of land. When you own a condo, you don’t own the land it is built on but instead you buy the air containing the borders of your condo. You can find out precisely what these borders are in the declaration document.

When you own a condo you are buying a piece of real estate with access to communal areas such as hallways, elevators and gardens. You can find out exactly what these common areas are in a document called the master deed. These common areas are managed by the home owners association that elects a board to deal with the daily running of the condo. This board will represent the building as a whole and will act on the general will of the owners. The board will decide upon the rules and regulations of the condo including pet ownership, maintenance money for the upkeep of communal areas and external decorating restrictions. If you are unsure what the rules and regulations of you condo are they can usually be found through a search engine if you type on the name of your condo association.

Detached condos are also available whereby individual houses are separately owned but the grounds including gardens, courtyards etc are not looked after by the homeowners. In this situation home owners have a greater say in the outside looks of housing. Restrictions are put in place in order to keep streets looking uniform. Detached condos, however, are very rare in Bangkok due to its basis as a high-rise city and also because of a lack of development space.

The concept of condo ownership can also apply to other building types including offices, shops, and hotels although this is also very rare with businesses preferring to make independent stylistic decisions and have a greater flexibility in the daily running of their business space.

Executive Condominiums, The New Way Of Housing

The executive condominiums are a type of housing that is becoming very popular in some parts of the world. The first one was constructed in the year 1994. This housing is somewhere in between private housing and public housing and they really look like private condos. They are usually enclosed and come with security and a gated compound. One other thing that can be noted about the executive condominiums is the fact that they come with all sorts of amenities that the residents can use. These include things such as playgrounds, clubhouses, and swimming pools. The executive condominiums are also usually sold and built by various private developers who are well known in the construction circles.

The construction is encouraged by the government and their construction is actually done at a much lower price. This is because the land prices come with subsidies from government. The CPF, Central Provident Fund grants can be taken by the buyers so as to assist them in paying for the executive condominiums as sold by the developers.

The executive condominiums are subject to regulations such as those that are applied to the different HBD flats. There are several limits and restrictions that have been put forward with respect to the ownership. The minimum period of occupancy for such condominiums is at least five years. During this first period, the executive condominium can be up for sale and it cannot be rented out wholly. After the first period, the citizens and the permanent residents can buy the property. After ten years have elapsed, foreigners can gain access to it.

There are executive condominiums located in different parts and the developers are usually well known in their circles. Usually, they include different blocks and come bearing hundreds of housing, residential units and most of the time they are luxurious. The establishments usually cover some sizable lands, creating space for all sorts of family related activities.

Usually, they are created in such a way that they have facilities that make life even easier. They include things such as:

· Lush landscaping

· Sky BBQ

· Tennis court

· Clubhouse

· A lap pool

The location of such projects is also thought out carefully. They are established near public transportation as well as expressways which allow commuters to connect to all other parts of the areas with great ease.

You also find that there are different amenities near such establishments. They include eating houses, minimart and shops for those with banking needs, retail and full dining needs. Apart from the amenities, education center, childcare, food court and supermarket are usually created so as to supply the resident with all the things that they may be in need of.

The units are designed in all shapes and sizes and the most essential aspect is the space that the residents are able to enjoy. Different family sizes can find a suitable unit with great ease. Grants are also given to assist citizens’ access to the property. If anyone is in doubt, financial calculations can be done so as to help you know whether you are actually eligible to purchase an executive condominium unit.

Offices, Condominiums and Apartments – How Have Things Changed In The Past 10 Years In Bangkok?

Hi. I’ve been working as a real estate agent in Bangkok since 2006. In that time I have seen some changes, but surprisingly very little has changed. Let me explain.

Apartment Rental Prices Bangkok 2008 – 2018

Rental prices of most apartment buildings have increased very marginally over the past 10 years. Whereas a spacious 3 bedroom apartment in Sukhumvit area would have cost 70,000 Baht 10 years ago, it may cost you 85,000 Baht today. That’s only a 20% increase over 10 years, actually far less than inflation, and in many ways an apartment is cheaper now than 10 years ago.

Why? It’s difficult to say but I would guess that ongoing political problems, 2 coups, and a pretty stagnant economy barely kicking over at around 3% growth in GDP each year are the reasons. This level of growth may be acceptable for a world leading developed nation, but for Thailand that (let’s face it) still has some way to go in terms of development, it’s not very good.

The apartment rental market in Bangkok is mostly governed by expats. Thai people don’t rent at these prices, either they don’t earn enough, or are sensible enough to buy a property in the suburbs, or are part of the immensely wealthy elite and already own several blocks in central Bangkok. As the number of expats has remained fairly constant, so have rental prices.

Newly built condominium buildings have seen a rise in rental prices, and there will always be a small percentage of people who have sufficient budget and only want to live somewhere very new, something is particularly true of Japanese renters, but the new buildings will become old and once they have been constructed and a rental price has been established, you will notice that the price will stay relatively stagnant from then on.

This is actually the same with condominiums for sale. Once a building has finished construction, a sales price and rental price is established, and it will remain stagnant at this level for years to come.

But prices have been increasing in Bangkok, everyone knows that!! So am I wrong?

Condominium Sales Prices Bangkok 2008 – 2018

I don’t think I’m wrong. There are some condominium buildings that have experienced a very good level of capital appreciation in recent years, but “on average” they haven’t.

Yes, prices have been increasing significantly in Bangkok, and this is something that all developers will happily promote to you when selling you their brand new project. They will show you graphs with an upward trend in prices, and show you that prices are increasing at least 5-10% year on year.

Prices of brand new buildings have been increasing a 5-10% year on year, but not completed buildings.

This is mostly down to increases in land prices. As land prices increase (and to some extent construction costs) so have the cost of new buildings. So new buildings get ever more expensive, but are completed buildings following suit?

No. And this is why I’m not wrong. A building that cost 150,000 Baht/sq.m. 5 years ago, may now only be 160,000 Baht sq.m. In this example around 1.5% compound growth. This building was brand new 5 years ago, and a brand new building today still under construction might cost you 200,000 Baht/sq.m. which is 33% more than the new building was 5 years ago, hence the 5%++ compound growth.

But the fact remains, the building that YOU purchased 5 years ago may have increased only 1.5% compound per year.

This is the ongoing trend with Bangkok property. New buildings constantly set new benchmarks in prices, and then remain the same. With even newer buildings adding a layer on top, setting new benchmarks, and then remaining at the same level. Even newer buildings still, just keep adding another layer on top.

This is why you will find such huge price discrepancy between buildings, even if they are located right next door to each other. An example would be Lumpini 24, a new condominium located on Sukhumvit Soi 24, where prices will fetch around 250,000 Baht/sq.m. So, a 60 sq.m., tiny little 2 bedroom unit will cost around 15,000,000 Baht.

Immediately next door is an older condominium called President Park, where prices have remained stagnant at around 60,000 Baht/sq.m. So, a very spacious 3 bedroom unit of 260 sq.m. will cost you around 15,000,000 Baht.

Four times bigger, located immediately next door, but the same price! So the old adage “Location, location, location” doesn’t apply here. It is ONLY based on the age of the building.

Here is an example of a newer building for sale, 275sq.m. asking 80,000,000 Baht: http://www.property-bangkok.com/viewproperty.asp?id=587

Here is an example of an older building for sale in a similar location, 366sq.m. asking 21,000,000 Baht: http://www.bangkokcondo.org/viewproperty.asp?id=614

Yes, the new condominium is much nicer, better design with newer lobby and sparkling facilities. But is the variation in price fully justified. I mean, 4 times the price!

Baring in mind that the interior of the new condominium will age and need replacing, and if you bought in the older building you can renovated the interior to have it all brand new.

In any event, whether you buy in the new condominium or older building is neither here nor there, the main issue being raised in this article is that prices of new projects may have increased nicely, but once you have invested in your condominium unit, you may not realise the same level of growth that you were told by the developer.

The only ones really seeing huge capital growth, are the land owners. And these are mostly already very wealthy Thai people, as non-Thai’s cannot own land. It doesn’t help the majority of non-wealthy Thai people who still remain financially strapped.

Office rental prices have also remained quite static. Over the past 10 years office rental prices have increased marginally, similar to the apartment buildings. However, as most investors (both Thai and Foreign) seem fixated on condominium buildings, the price of office space for sale has also remained quite static, and arguably office units for sale provide the best option for rental returns, given that office leases are normally minimum 3 years, and you don’t need to renovate the office space like you would with a condominium, with the former requiring a whitewash lick of paint, the latter new furniture, new bathrooms, new kitchen etc.

This is not to say that it is a bad idea to invest in Bangkok real estate. But you need to consider office space and commercial properties as well as residential, and you need to very carefully consider the building, as I previously mentioned, some condominium buildings have seen good growth over the past 10 years, whereas most haven’t.

You need to have a good eye. Best of luck!

Getting Financed For The Condo You Want

Avoid looking at condominiums you really can’t afford. There is no reason to set yourself up to fall in love with a place and then you can’t get the money for it. You also have to be careful about getting financed but knowing you realistically can’t stick with such a payment month after month. Don’t put yourself in that type of position where foreclosure is possible.

Finding a Lender

Take your time to find a lender with plenty of experience so you can get the condominiums with the best choice for your needs. Ask your friends, family, and people you work with who they have talked to. Chances are you know someone who has purchased a condo I in the last year. You can also evaluate lenders online and set up appointments to talk to them.

Ask them questions about their experience because you want a lender that is easy to work with. They should be friendly and communicate well. They should return calls timely and answer ay questions you may have. They can walk you through the application process. Make sure you fill it out accurately and don’t skip any of the sections. Talk to them if you aren’t sure what to put.

Never lie or omit details when it comes to your application for one of the condominiums. Be honest and let them tell you what documents they need to get the processing done. The verification they request can include tax returns, verification of income, a photo ID, and consent to complete a credit report. Profit and loss reports are required for self-employment.

Evaluate the Loan Offer

Once they get the loan completed, they can share with you what can be offered towards one of the condominiums. This includes the maximum amount of the loan, the interest rate, and what your monthly payment will be if you borrow that amount of money. If you can find a condo you want for less, this means your monthly payment will be lower and that is always good news.

If you don’t understand the offer, ask plenty of questions. Don’t be in a rush to accept the offer until you know what it entails. You are making a long-term commitment when you buy one of the condominiums so don’t leave anything to chance with this part of the process. Once you are happy with the offer, it is time to find your place!

The Market

There are plenty of people interested in buying condos in this area. You are going to have more buying power though if you are already approved for the money. This means a great deal in the eyes of the seller. They will be more willing to negotiate the price with you than holding out for more from any other offer they may get down the road.

Compare prices in different locations too because a condo in one neighbourhood can cost you considerably more than one just a few miles away. If you need to stretch the money you will get with the loan, take that into consideration. It may be worth it to have more space and a slightly longer commute than the other way around.

Getting Yourself Into An Upscale Condo

Ask questions so you know exactly what you will be committing to if you buy such a condo. You need to know what your responsibilities will be, the perks offered, and more. You can be sure buying such a great place to live it a wise investment.

Lovely and Convenient Location

The majority of the luxury condos are located in a very lovey and convenient location. They are close to Windsor Park and the University of Alberta. The area is surrounded by beautiful trees and green grasses. You will enjoy the view from your new residence! The convenient location makes it very fast and easy to get to a variety of great places.

Your residence is where you can relax and unwind. You want it to be lovely inside and out. You want it to be appealing as you come home at the end of the day. You should have plenty of space for all of your personal items. It can be fun to decorate luxury condos to fit your personal sense of style.

Spend some time looking at the various styles of such upgraded condos in the area. You are sure to find those that really appeal to you the most. You may be interested in a traditional look or you may want something that offers all the newest design elements. It can be fun to shop around and compare them.

Things to see and Do

You won’t have to go far to find plenty of things to see and do. There are so many in the proximity. It will be fun to explore and to identify your favorite places you will go to again and again in the future.

There are plenty of recreational areas her for you to enjoy sports and exercise. There are trails for walking and jogging. The parks offer a relaxing place to have a picnic, view the water, and even to enjoy a concert now and then. There are art galleries and museums in the area to spend time leisurely exploring.

You will appreciate close access from luxury condos to educational facilities. There are many health care options in the area so you can feel good about getting what you need at any time. There is no shortage of great places to dine or to go shopping. All of it adds up to an exceptional value for you day after day in this area.

Getting Approved

Don’t assume luxury condos are out of your price range. It may surprise you to see how far your money will go. Check out the various price ranges and you will be happy to explore the financing. It is a good idea to go through the approval process before you start looking at the real estate. This will help you to know the price range you can afford.

It makes the entire buying process much easier. It also gives you some leverage when you make an offer on any of the luxury condos has to offer. The sellers will be impressed by the fact that you already have your funding in place. They are more willing to accept an offer lower than their asking price when it is a sure deal.

Condominium Insurance: Two Simple Things You Need to Know

As an owner of a condominium or perhaps a potential purchaser, there are 2 very simple things you need to understand about insurance. (Of course, there are many more than two things involved in this subject, but only two are critical if you’re worried that the subject will be a good cure for your insomnia… these are the important two, so pour the coffee and stay with me on this.)

Number One: The Condominium Corporation is required by provincial legislation to carry general liability, Directors & Officers, Errors & Omissions and machinery & equipment insurance and the Corporation’s bylaws can stipulate other coverage regarding the Corporation’s operations. These documents ensure that as an owner, your interest in the condominium as a whole, is protected. (This is also the insurance that your mortgage company will want to know about.)

If fire damages or destroys the building or a block of townhouse units, the Condominium’s insurance policy will cover the repair or replacement costs and owners will not be required to pay the rebuilding costs.

Your monthly fees include your share of this cost to the property as a whole.

Number Two: The Condominium’s insurance will not pay for your Uncle Bob’s lost wages when he trips on the ottoman in your den and breaks his leg. It will also not replace your puffy-white-cloud sofa when your red wine juggling routine goes awry.

These types of claims – personal liability and damage to personal property (alone) must be addressed through your own personal insurance policy. Specific coverage for condominium owners is available from most insurers and is generally more affordable than standard homeowner’s insurance, since your insurer is not liable for covering the cost of replacing the structure itself – rather, just the contents and (depending on your Corporation’s bylaws) any improvements you make to the interior of the structure. Your broker can help you to find the most appropriate coverage for your needs. (Hint: if you currently don’t have a broker or would like a competitive quote, you may want to check with your Condominium’s broker for a quote – some will offer discounts for owners in a property they cover.)

What you need to be aware of is that there are two types of insurance and that one is entirely your responsibility.

Recall the poor souls you’ve seen on the news whose condos were damaged or destroyed by fire – their unit will be repaired or rebuilt, but their personal belongings won’t be replaced if they didn’t have their own policy for contents. A final note in this regard – and this one should keep you from nodding off – is to be sure that your personal policy will pay any deductible that you may be responsible for. This situation can happen to anyone and certainly has in the past – you forget to close the bedroom window before you leave at Christmas – your pipes freeze, burst and flood your neighbour’s units. While the Corporation’s insurance will respond to the claim, you can be held responsible for the deductible amount. With this coverage on your personal policy, you won’t be out-of-pocket for this mishap (unless the Condominium’s insurance premiums are increased next year as a result of the claims history, in which case – all owner’s fees may be increased to cover the additional cost.)

Of course, this is a far more complex topic than what can be represented here before we have you looking for a pillow and blanket, so if you’re interested in more in-depth information, speak to your broker and/or your Condominium’s broker about further details.

Discovering Four Fabulous Sarasota Beach Condos

The communities surrounding four fabulous Sarasota Beach condos are characterized by their serene beauty and broad array of outdoor adventures. Located along the Gulf of Mexico on Florida’s southwestern coast, these sites offer exceptional waterfront living for seasonal and year-round residents. Water sports, shopping, museums, theaters, hiking trails and endless stretches of blissful seashores are among the area’s top attractions.

Siesta Key is an eight-mile barrier island. The Palm Bay Club is a seafront complex featuring one eleven-story and six three-story buildings. Nestled along Crescent Beach, these apartments have sweeping views of aquamarine waters. In addition to housing long-term residents, this exclusive community also offers visitors opportunities to reserve short-term rentals.

Harvard University’s geology department discovered the sands of Siesta Key are composed of ninety-nine percent quartz. This creates dazzling white, fine-grain sand which never feels hot. The unique sand and warm waters attract many locals and tourists. It’s considered one of the top ten locales in the state.

This enticing barrier island is also home to the Peppertree resort. The community features two-story townhomes, garden homes and five high-rise structures that extend across 400 feet of seaside property. A short drive across the north bridge leads into the downtown area, and the nearby south bridge provides access to many additional amenities.

The Lido Key is a barrier island connected to the Mainland by the John Ringling Causeway. Its attractions include an active nightclub scene, as well as the South Lido Park. L’Elegance is one of the newest luxury resorts on the island. A tennis court, heated swimming pool, hot tub, exercise room and sauna are among the on-site amenities. The building consists of about one-hundred units with two and three-bedroom options, ranging in size from 1,350 to 2,230 square feet. All have spectacular views of white sand and crystal blue waters.

Constructed in 1996, the Water Boat at Longboat Key is a modern two-tower structure with amazing views of the Gulf of Mexico and the Bay. The 16-acre site features large units, many exceeding three-thousand square feet. Balconies, large picture windows and high ceilings are among the unique features of these opulent homes. This island, stretching eleven miles, has a population of about 7,400, including retirees and working professionals.

Among western Florida’s many alluring qualities, these four fabulous Sarasota Beach condos rate high. For those seeking vacation get-aways, second homes or year-round water-front living, this exquisite coastal area offers many possibilities. A web search for luxury Sarasota real estate will provide more details.

Thinking of Buying a Condo Hotel? Here Are 20 Things You Need to Know!

1. What is a condo hotel or condotel?

Think of a condo hotel (also sometimes called a condotel or hotel condo) as buying a condominium, although one that is part of a four-star caliber hotel. Therefore, as an owner, when you are on vacation, you’ll get the benefit of more four-star services and amenities than you’d get in a typical condominium.

2. What types of services and amenities are found in condo hotels?

If you can imagine the niceties you’d find in an upscale hotel, then you can picture a condo hotel. Among the features are often resort-style pools, full-service spas, state-of-the-art fitness centers, fine dining restaurants, concierge services and room service.

In some locations, like Las Vegas, you’ll find condo hotels with their own casinos, retail areas, and entertainment venues. In places like Orlando, you’ll find condo hotels with their own water parks and convention facilities.

3. What is the difference between a condo hotel and a traditional condominium?

The big difference between a hotel and a condo hotel is that a hotel typically has one owner, either individual or corporate, but a condo hotel is sold off unit by unit. Therefore, a 300-room condo hotel could have as many as 300 unit owners.

4. Is it evident to hotel guests whether they’re staying in a condo hotel or a traditional hotel?

A hotel guest will likely never know that the hotel has multiple owners because the property is operated just like a traditional hotel and often under the management of a well-known hotel company like Hilton, Hyatt, Starwood, Trump or W. Also, each of the individual condo hotel units will look identical in design and décor to every other, just as they would in a traditional hotel.

5. Who typically buys condo hotels?

They’re primarily sold to people who want a vacation home but do not want to deal with the hassles typically associated with second home ownership such as maintaining the property or finding renters in the off season.

6. What is the demographic of the typical condo hotel buyer?

The spectrum of condo hotel buyers is pretty broad. There are families that want a second home in a vacation destination. There are baby boomers who are at or nearing retirement and want somewhere they can “winter.” There are also plenty of investors who purchase a condo hotel unit with little intention of ever using it; they’re in it for the potential appreciation of the real estate.

7. Can you live in a condo hotel?

Condo hotels are not typically offered as primary residences. In fact, many of them limit the unit owner’s usage of the condo hotel unit (typically 30-60 days per year) because the unit is expected and needed in the hotel’s nightly rental program where it can be offered to guests and generate revenue.

8. Who gets the money when your condo hotel is rented out?

The hotel management company splits the rental revenue with the individual condo hotel owner. While the exact percentages vary from property to property, the typical rental split is in the 50%-50% range.

9. Who finds hotel guests and then cleans and maintains the condo hotel units?

The hotel management company markets the property and books hotel guests. It also maintains the unit and ensures the smooth operation of all of the hotel’s services and amenities.

10. What are the advantages / disadvantages of purchasing a condotel over purchasing typical rental properties?

Advantages include:

· Hassle-free ownership; no landlord issues

· Rental revenue to offset some or maybe all ownership expenses

· A fantastic vacation home available for use whenever you want

· A real estate investment at a time when other investments may seem less attractive

· Strong likelihood of appreciation

· Pride of ownership –“I own a piece of a Trump”

Disadvantages include:

· Annual cash flow could be equal to or less than annual ownership costs

· Pets are usually not welcome.

· An owner’s condo hotel unit may be rented when the owner wants to it, so advance reservations are required to guarantee availability.

· The condo hotel unit is subject to the same dips in the market that affect all hotels in the competitive market set: hurricanes, terrorist threats, warm winters up north, price of gas, etc., all of which can affect a unit’s occupancy rate and the amount of revenue it generates.

11. Are condo hotel units difficult to finance?

Not at all, but they do take 20% down typically, whereas condos can be purchased with less cash down. It’s also important to make sure you use a mortgage broker who has had success in getting condo hotel financing deals done. Many banks still do not do them, but more and more are getting involved as condo hotels become more widely available.

12. How long have condo hotels been around and where are they located?

Condo hotels have been around for several decades, but the huge surge of four-star and five-star condo hotels that have been making their way across the country, started around year 2000 in the Miami area. The Miami-Fort Lauderdale area still has the most condo hotels, but areas like Orlando and Las Vegas are developing condo hotel properties at an even faster rate and will likely surpass South Florida soon. Other up-and-coming areas are places like the Bahamas, Panama, Dominican Republic, Mexico, Canada and Dubai.

13. How much do condo hotel units cost?

That’s like asking how much a car costs. There are different quality condo hotels. Some require greater amounts of money than others, obviously.

There are inexpensive condo hotels out there for as little as $100,000. These are typically found in properties that have converted their use from an existing hotel. They are hotel room-sized, lack kitchen facilities, luxury franchises, and other first-class amenities.

Then there are the four-star or greater properties that may start in the $300,000 to $400,000 range, but can go all the way up to $800,000 just for a studio unit. One- and two-bedroom units cost substantially more than a studio. Of course, the studios do come fully furnished and finished, and will be significantly larger in size than a typical hotel room, and may attract guests because of its name like St. Regis, Ritz or W.

14. What are typical maintenance costs?

On average about $1.00 to $1.50 per sq. ft., but the range can exceed $2.00 sq. ft. in the most luxurious properties.

15. Do you buy condo hotel units after they have been built, or can you purchase condo hotels in pre-construction?

Unless you are in a hurry to get started vacationing or you need to complete a 1031 exchange, it’s best to buy condo hotels in pre-construction as early as possible. That’s when prices are lowest and unit selection is greatest. You will likely wait two years or longer before closing on and taking possession of your condo hotel unit, but you will have locked in the price and will get the benefit of maximum appreciation.

16. Is there anything else investors should want to know about condotels?

There is more to buying this type of real estate than the old phrase, “location, location, location.” While most condo hotels are located in desirable resort and business area locations, what is most important is a good franchise with a strong reservation system.

Also, do not be fooled by an aggressive rental split. One way or the other, the developer of the property will have to staff, maintain and operate the hotel and its services like the restaurants, bars, spas and pools from his share of the proceeds. If he’s giving you a very favorable share of the rental, he’s also more likely to be charging you a higher monthly maintenance fee. Of course, this goes both ways. If the maintenance split that is offered is closer to 50-50, then your maintenance should be more reasonable too.

17. Any suggestions to investors in choosing which condo hotel to buy?

Get good advice. That means you don’t want to rely only on the pitch provided by an onsite salesperson at a condo hotel. You want to talk with a broker who specializes in condo hotels and who knows and understands the entire condo hotel market, not just the facts pertaining to a single property. He or she will listen to your wants and needs and then offer recommendations as to which properties best match your requirements. You’ll have an opportunity to comparison shop and consider the pros and cons of each available property.

A good broker can be the difference between your buying a condo hotel that will be problematic and not live up to your expectations or one that will provide you with years of great vacations, good annual revenue and a substantial profit when you sell.

18. Does it cost more to use a real estate broker to purchase a condo hotel than buying a unit on one’s own?

No. With new condo hotel properties, the prices are always set by the developer and are exactly the same whether you buy directly from an onsite salesperson at the property or using a broker.

The broker’s commission is always paid by the developer and is already built into the price regardless of whether an outside broker participates in the sale or not. Since a broker’s representation is free to buyers, it does make sense to enlist their aid and get the benefit of their advice before making a purchase.

19. How can prospective buyers find a good condo hotel broker?

Ask friends for broker recommendations or search online for “condo hotel broker.” Visit condo hotel broker websites and see if the information they provide seems comprehensive and unbiased. If their website seems to focus on selling homes or office space, and the condo hotel information appears to be an afterthought, steer clear. Your best bet is to work with a condo hotel broker who specializes.

20. How can buyers learn about new condo hotel properties coming on the market?

Condo hotel brokers can be good information sources as they often learn about properties prior to their release to the general public. Another option is for them to subscribe to a condo hotel newsletter such as the one we publish called Condo Hotel Property Alert. We offer it for free on our website http://www.CondoHotelCenter.com and it features a different condo hotel property coming on the market each edition.