What are the differences between Las Vegas residential high-rise condos and condo-hotels?
We can divide Las Vegas high-rise towers into two categories, residential and condo-hotels. The difference is how long the unit can be rented and how the revenue is divided. Condo-hotels have appreciated far less than residential towers, and the COVID-19 has hit a few the hardest of any real estate sector. For example, you can buy a condominium at Trump Tower for $10,000-$20,000 less than they sold in 2013.
A: The minimum rental period for Las Vegas residential high-rise towers is six months for the vast majority of towers, except the Ogden, which allows nightly rentals. The owner is in full control of the unit.
Investors can rent condo-hotels in two ways:
1: The owner can enroll it in the hotel’s rental program. After a unit rents, it goes back to the end of the queue and waits for its turn. The owner and hotel share proceeds, and the amount varies by each tower. Hotels are prohibited by law from giving prospective buyers a projection of the expected income.
2: The owner rents the condominium by advertising on a site like VRBO or Airbnb and takes responsibility for cleaning and maintaining the unit. The minimum rental period in Las Vegas is one month, and owners have to get a special business license to rent their unit on a nightly or weekly basis.
Rooms advertised on Airbnb or VRBO offer room rates at a high discount from the hotel itself. But there will be added charges for cleaning and re-stocking the rooms which decrease the discount.
Another difference is that the HOA fee and other charged fees are steeper than the residential condos.
How COVID-19 has affected condo-hotel’s pricing and Cash flow
Las Vegas condo-hotels have been hit hard by the COVID-19. The COVID-19 lockdown brought the income from condo-hotels to zero, and the current slowdown in tourist visitation on weekdays is negatively affecting income from condo-hotels.
These problems have led to explosive growth in condo-hotel listings, and lower sales, which has led to significant price declined in a few towers. For example, some MGM Grand units are selling for $20,000-$30,000 less than in 2019.
If you want to invest in a residential high-rise condo, we can give you an excellent estimate of the cash flow before you make an offer. The same is not possible with condo-hotels because hotels do not publish any information about it. Sometimes a unit owner answers the cash flow question in a real estate forum, and the cash flow from renting condo-hotels before COVID-19 has been in the 4.5% plus, minus .5% range. But doubtlessly, far less in the current climate in December 2020. That is the extent of our information.
So, for the first time, we are not recommending buyers to avoid condo-hotels as these price cuts will reverse towards the end of 2021, leading to increased prices. So if you want to buy a condo-hotel, contact us at 702-271-6113, and let’s get you one or more.