Many Filipinos invest in real estate. Many buy land properties, houses and condominium units. They either use real estate for personal use or for additional income.
Many invest in real estate stocks as they to aim to capitalize on the growth of the sector. With the looming presence of the Real Estate Investment Trust in the country, a proportion of Filipinos will likewise be inclined to explore that alternative.
One type of real estate investment is the condotel. Is the condotel a good and viable alternative? Is it for everybody?
A condotel is generally described to be a condominium project that is operated as a hotel with general accommodation, concierge and housekeeping services. The different rooms of the condotel serve as the investment opportunities for investors. In effect, the individual investors become the owners of the units and are also the part-owners of the condotel as pertinent documents of legal ownership are present.
There are quite a number of benefits that are associated with condotels. With a condotel, there is the possibility of gaining through property price appreciation. If the condotel does well and, if in the future, the investor will decide to sell the condotel unit, the prospect of generating significant financial gains through a high selling price will be likely. These gains give the investor more flexibility in terms of finances.
The condotel is also potentially a good source of passive income. Many people who would buy condotels would be primarily working hard to maximize their active income. The rental income that would be regularly generated by the condotel can significantly augment active income. This will then make cash inflows healthier and if the rental income is continuous, then the cash inflows become more sustainable.
The condotel can be viewed as a home away from home. Usually, condotel investments would have a host of other benefits like access to various social and business amenities. A certain number of free nights in a year are given to each investor of the condotel. In today’s fast-paced environment, having a place for rest, recreation and quality time with the family certainly bring about intangible benefits and fond memories.
There are halo effects of being a condotel investor. When the condotel developer decides to advertise and fortify relationships with new and old guests, the condotel investors benefit. The management of employees and various services to guests are managed fully by the condotel developer. Maintenance expenses are likewise handled by the condotel developer. This is not the case in other real estate options.
Still, no investment in the world is perfect.
Just like any investment, certain considerations have to be made by investors in deciding if condotels are for them or not. One vital consideration would be the high investment outlay and also high possible monthly financing costs just in case the purchase will be funded by a bank loan. Another matter to consider would be the taxes that have to be settled given the ownership characteristics of the investment.
Not all locations are the same. Investors should assess what areas have good potential to maximize earnings. Not all condotels are the same. Not all condotel developers are the same. It is important for the investor to check the reputation and performance of the developer. The success of previous real estate projects, current financial strength and soundness of future business plans can be good indicators.
Amid the total real estate landscape, condotels are still in the development stage. There are many benefits but there are also important considerations that matter. Hopefully, the benefits will outweigh the risks.
Genesis Kelly “Gemmy” S. Lontoc is a Registered Financial Planner of RFP Philippines. To learn more about personal financial planning, attend the 84th RFP program in August. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.
1 comment