Condominium hotels and resorts advice for investors (Part 3)

Have you read Part 1 and 2 regarding condominium hotels and resorts?

Following on in this true saga, the next morning on awakening you feel water on the bathroom floor and look up to see on the bathroom ceiling a water stain and dripping water. A quick call to the front office agent and you get passed onto the rental maintenance department. However you are then  passed onto the common area building maintenance department, (the strata property management company as your building has both a rental and a strata property management company and is not managed by one operating entity)!

You are becoming confused…

The strata property manager then makes it clear this is a strata issue and that the owners of the unit above will be contacted and this issue will be fixed by the strata property management company.

The strata property manager now has to ascertain the reason for this leak, and after some time and cost to the owner above concludes it was from a leaking water pipe connection to the dishwasher in the kitchen above, which backs onto their bathroom.

So you pass that information off thinking that the owner above wasn’t in the unit at the time  and why didn’t the rental management company take action on this to stop it, as they rented the unit out. Or shouldn’t they have charged the renter you think, but on asking the strata manager for an explanation so you can better understand how the system works get told that the rental management company didn’t report the issue, as they should have done, and the guests were not charged for any damage. On asking the rental management company why this happened you are told that the guest checked out before they noticed anything wrong as it was a hidden pipe problem, so they could not consider charging the renters, and anyway this was a wear and tear issue and not related to any actual direct action which could be defined as abusive by the renters, so no action would have been taken to charge the renters anyway.

You are perplexed and further confused.

Why was the leak not reported to the strata manager earlier, why did housekeeping not report the damaged ceiling in the suite below?

All this leaves you wondering why you did not have this kind of discussion with the strata property manager and the rental manager prior to purchasing the unit. You reflect that the only information you were supplied was some beautiful artistic renderings and some income projections. You leave more troubled than you were when you arrived, blaming yourself for not doing adequate due diligence on buying a second home.

Now add-on to this, how about this model being further complicated by a developer promoting it as a fractional development with 3-month segments with 4 possible owners,  and a flexible rental pool option? One owner can rent if they wish, the others may not if they do not wish to.  Yes, it happens! Anything to sell something!!

Work that one out!!

Who pays for what, is the first question one needs to ask as a buyer, then do your sums and work out the bottom line and ask yourself ‘will this be a good financial deal for me?’ It is a financial investment transaction, you are not buying into a second home, you are buying into an investment where the users of the unit will not be as caring as you, with an investment model which over the years has proven to be a risky one.

Lesson:  Owners and buyers, beware of the so-called ‘income projections’ presented by the developers and uneducated real estate agents that are totally unrealistic and that bear little or no resemblance on what the net income could possibly be. Get independent advice before buying into a condo hotel.

Lesson: Developers partner with hospitality management that knows how to get results!

Developers who want a partner to make a long term success of a project please contact Mark, and for owners, please do the due diligence!

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