Dubai condo hotels have been getting a lot of publicity lately. They offer a hassle-free means for international investors to purchase real estate and participate in the growth of this dynamic city.
Condo hotels (also sometimes called condotels and hotel residences in the U.S. and referred to as residence apartments in Dubai) are luxurious condominiums located in five-star hotels. While owners can use their condos when they'd like, most investors in Dubai don't intend to use them at all. Instead, they plan to place their unit in the hotel's rental program full time and receive a percentage of the revenue it generates.
1. How do condo hotels differ from other types of vacation homes?
Condo hotels are not your typical second homes. They are fabulously-furnished condominium suites in some of the most famous hotels and resorts around the country.
The properties are usually large, high-rise, luxury hotels and come with premium services like valet, concierge and daily housekeeping. All issues regarding maintenance and operation are handled by an onsite professional management company. Prices can range from $150,000 (U.S.) to over $1 million for prime properties.
2. Is a condo hotel right for you?
The ideal Dubai condo hotel buyer is someone who wants to participate in the rapid growth of Dubai but does not have the time, inclination or ability to manage property on his own. He would like a professional management company to handle the maintenance of the condo he owns, renting it out to guests, as well as all other hotel operational issues.
3. Is the condo hotel well-located in Dubai?
Consider whether the property is located in a popular destination, one that is likely to do a healthy tourist or business trade regardless of economic factors.
A condo hotel that is near a convention center, a theme park or cruise port will benefit from proximity to these high-traffic venues and will have higher occupancy rates. And higher occupancy will translate into more annual rent revenue to unit owners.
In Dubai, the hottest spots for condo hotels are near the Dubailand theme parks which will soon attract millions of guests each year much like Disney World, and Dubai's financial district, sure to attract millions of business travelers each year.
4. Will the Dubai condo hotel have any on-site amenities that will draw guests such as a health club, spa, fine dining restaurant and retail stores?
You'll want to choose a condo hotel that has a host of amenities to appeal to Dubai visitors and justify the room rates it plans to charge.
5. Will the individual unit that you're considering in a Dubai condo hotel meet guest needs?
Does it have enough bedrooms, enough square footage, to satisfy hotel guests? Does it have kitchen facilities? (Most do, but not all.) Does it offer an appealing view? Is it provided furnished?
6. Is the Dubai condo hotel developer offering any type of buyer incentive?
Many Dubai condo hotels are sold with a rental guarantee to entice new buyers. For example, one of the largest Dubai developers offers a guarantee of an annual 8% return or 60% of the rent revenue, whichever is greater for the first three years of operation. After the third year, the owner simply receives the 60% revenue split without the guarantee, but presumably by then, the hotel will have become established and will be able to achieve its occupancy goals.
7. What is the revenue split and anticipated annual expenses of the Dubai condo hotel?
Whereas U.S. developers are hesitant to discuss revenue splits because of SEC regulations, Dubai developers are free to discuss these details. Most offer a 50% to 60% split of the unit revenues to the unit owner. Most can also give you an estimate of expenses you can expect each year.
8. When is the right time to buy this condo hotel?
The best time to purchase a condo hotel unit, from an investment standpoint, is in the preconstruction stages. Most developers are required by their lenders to pre-sell as much as 50% of their units before receiving their construction loan. The good news for buyers is that the time before the first shovel hits dirt is when prices are lowest and selection is greatest.
While the building process could be as long as two years, you'll have paid in "today's dollars" for your condo versus the appreciated price once the condo hotel is complete and operational.
9. How can I find out about condo hotels in early preconstruction stages in Dubai?
It can be difficult to learn about condo hotels before they're built. After all, there's no building to catch your eye and unless you live in Dubai, you won't be privy to "local buzz" about a new project.
Your best bet, therefore, is to align yourself with a knowledgeable real estate broker, one who specializes in condo hotels and has connections with Dubai's development community.
He or she can tell you what is currently available, keep you apprised of new condo hotel projects coming down the line, and also clue you in to special buying opportunities (sales, default units coming back on the market, buyer incentives, etc.) which occasionally crop up.
10. Will the Dubai condo hotel unit you've selected appreciate?
If investment is your primary goal, you want to choose a property that has good appreciation potential. Look at surrounding properties and area appreciation rates. Does the condo hotel have lots of competition? Is it different or better than other area properties?
Is demand for hotel rooms in the area expected to grow in the coming years? In Dubai, this last question is the most important and almost undoubtedly can be answered with a resounding "yes!"
Joel Greene is the president of Condo Hotels Dubai and its parent company, Condo Hotel Center located in Miami, Florida. If you would like to know more about investing in Dubai real estate, be sure to request Joel's FREE Dubai Condo Hotel Report.