Buyer’s Guide to Hotel Condos and Branded Residences Part 1: “What am I buying?”

Hotel Condos: Trump Soho at 246 Spring Street, New York

Hotel-branded residence: The Residences at Mandarin Oriental New York

This is the first in a multi-part series looking at the differences between hotel-branded residences and hotel condominiums, as well as the advantages of each structure. While from the outside these shiny glass towers and luxurious beachside villas may all seem alike, this guide will help buyers considering both structures decide on their next purchase.

Let’s start here – so what are you buying exactly?

In the case of a hotel-branded residence, it is just that – residential real estate. Sure, it may look like a hotel from the outside with an incredible swimming pool and a five-star flag out front. But branded residences are truly just the best residential properties that money can buy – generally in top locations with superlative quality and exceptional services and amenities. Often they are integrated with – or next to – a luxury hotel or resort, but don’t get confused: they are residential. Buyers can use them as they wish, furnish them to their liking, and rent them if they like (although rentals are contentious and practice varies across different buildings).

In “hotel condos”, the inverse is true: you are buying hotel real estate. Just like investing in an office park on the Danube or a retail building on Worth Avenue, the asset is generally an investment. Like other investments, ownership has its lifestyle perks and owners can use their hotel room, suite or villa for a certain period of each year. When not in residence, the hotel management will rent out the room and distribute a share of the proceeds to the owners to offset their costs or generate profits. But for various reasons – ranging from hotel operations to local zoning laws – owners are not entitled to stay their year round.

Simple, right? Then Why Won’t Brokers Level With You?
Like other investments, the sales of hotel condominiums as investments would be regulated by the Securities and Exchange Commission in the United States, or for properties marketed to buyers in the US. Virtually all real estate agents are not licensed to sell securities so focus on the lifestyle aspects and are limited and restricted from giving investment information to prospective buyers. Ask them how much money you can expect to make from such an investment and they will be hesitant to give you more than a list of nearby five-star hotels and awkward body language.

But don’t be scared off – for the savvy real estate investor that wants to diversify into the hotel real estate without splurging for a new site on the Bund, there are some great opportunities in the hotel-condo sphere that do come with compelling perks! But homebuyers that want to use their hotel residence as a primary home and not put away their toothbrush before they leave on holiday should stick to the branded residential sector.

In upcoming parts of this series, we will look closer at the differences from different perspectives, including design, financing, occupancy and rental programs.