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Do condo-hotels make good investments?

Hoteliers in resort locations are offering guests a stake in the business by selling individual units as condominiums. Not only is this an opportunity to own a second home in some of the country's favorite playgrounds, promoters say, but owners can look forward to some income when the property's management rents the room out to guests.

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Realtor Christian Charre, a senior vice president with Jones Lang LaSalle, markets hotels throughout the Americas and the Caribbean. "If you live and work in New York and buy a residence in Florida that you use maybe two to four weeks a year," he says, "having a professional company renting the room for you the rest of the time, when it would otherwise be empty, can offset some of the expense -- and you still own a piece of the beach."

It sounds like a pretty good deal, but the facts show condo-hotel consumers would be wise to check the closet for financial skeletons before signing on the dotted line. The hotel business can be notoriously unstable -- and if that room doesn't rent out, the buyer won't see any of the income from it.

Where you'll find them
"Condo-hotels are usually upscale, full-service developments in the strongest hotel markets -- either popular vacation destinations or large cities where suburbanites frequent hotels for business or leisure purposes," says Tim Ford, vice president of operations at Lodging Econometrics, one of very few companies tracking the trend.

Some 43 condo-hotel projects containing 7,715 guest rooms are scheduled to open this year in the U.S., Ford says. Another 33 projects totaling 8,271 rooms will open in 2007. Of these, 70 percent will be built new, while 30 percent represent conversions of existing hotels. Nearly half are in Florida.

Hotels undergoing conversion run the gamut from the ultraluxurious to more modest family-style lodgings.

Ancient City Hospitality Group plans to convert the Casa Del Mar Inn & Suites. The property is a Spanish-style waterfront luxury hotel in Vilano Beach near St. Augustine, Fla., the state's oldest city, and is set in prime golf country.

Sales prices for Casa Del Mar's 94 rooms, ranging from 350 to 500 square feet, start at $329,000. The asking price for the 1,552-square-foot presidential suite is $1.8 million.

Buyers who prefer something quaint can get a unit at Tuckaway Shores Resort, in Indialantic, Fla., not far from Cape Canaveral. Developer Jacqui McPhillips says when she heard the 32-unit property was on the market, "I was tearing it down in my mind for high-rise condos. But when I saw it, I realized it was much too nice to tear down."

Two-room suites in the L-shaped building are selling for $244,900 to $274,900. Most of the roughly 400-square-foot units offer breathtaking views of the Atlantic Ocean.

While independents were the first to latch onto the condo-hotel concept, major hotel chains are starting to get into the act. For example, Boston-based Sonesta International Hotels has four condo-hotels completed or underway, all in Florida, says Stephanie Sonnabend, CEO and president. "That's where they're popular now, but I believe that the trend will be growing in other similar destinations," she says.

Next: "There will be restrictions on the amount of time owners can use it."
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