Condotel is an acronym for Condo & Hotel which means Apartment Hotel or Hotel Apartment. This is a very popular concept in the world market. However, it is still quite new in Vietnam and only got popular in a couple of recent years. The hype for condotel rises fast in Vietnam, but do the investors in condotel fully understand the risk and consequences when investing in this type of real estate?
Condotel
As a combination of two types of real estate, Condotel has both the function of a hotel and the function of an apartment complex.
As a hotel, the condotel has a reservation system and other hotel services such as a swimming pool, health club, nightclub, restaurant, shop, mail service, and room service 24/7.
The difference between Condotel and a traditional hotel is that Condotel allows guests to buy full ownership of the apartment for vacation and rental.
As an apartment complex, the condotel is designed with full kitchen facilities, living room, bedroom, etc. with full cooking utensils and allowed the visitors to go to the market and experience a lifestyle like what they can do on their own home.
The difference between a condotel and an ordinary apartment is that it needs to have a unit to manage and operate the sublease and daily operation.
The owner of a condotel
According to the current market, when talking about ownership of a condotel, there are usually 2 main groups, which are:
- Investors: This is a group that wants to buy hotel apartments for investment purposes to increase profits. For them, the attractive point of condotel is the ability to quickly recover capital and the potential to gain benefits in the near, middle, and long future.
- Tourists, successful business people, and people with middle-class income: This is a group of customers who buy or rent condotel to enjoy life, making the condotel their home or a vacation house that belonged entirely to their ownership.
Inadequacies and risks when investing in Condotel
When talking about the parties involved in a condotel transaction, there are usually three parties: the investor, the customer (secondary investors), and the funding bank.
When buying an apartment or a condotel, most customers have to take a bank loan through the investor’s introduction. Normally, they will have to pay a part of the reciprocal capital in advance (nearly 1/2 of the apartment’s value) and return the product to the investor for business.
Accordingly, usually, the condotel apartment business is beyond the control of customers.
Most business operation is conducted according to the head investor’s strategy. Many customers do not know how the business strategy is and are almost ignorant about the investor’s condotel business.
This will be fine for customers who don’t care about the progress but only the result. However, the result, the income that they received is due to the progress of business that the condotel is made.
Customers only receive the profit committed by the investor, but these commitments do not have strong enough sanctions to ensure the interests of the customers when the commitment is not implemented.
In addition, there are many fees such as management fees, brokerage fees, guarantee issuance fees, loan interest support fees, etc. In reality, not just gaining profit, sometimes customers become “debtors” when signing contracts to buy condotel apartments as they have loaned a lot of money from banks, relatives, other credit institutions, etc.
When the investor violates the commitment, the customer can only sue.
For real estate disputes that have clear documents, the suing procedure has already proved to be difficult. For condotel apartments with incomplete legality, the adjudication of disputes in court is even harder and will take a long time to settle, even unable to settle.
Meanwhile, customers still have to continue to pay interest to the bank during the procedure.
The obvious loss belongs to the customer and the investors are only affected by reputation and brand, but they will quickly recover from it.
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