Owning a condo connected to a Las Vegas hotel is similar to, though not exactly the same as, owning one in any typical condominium building from Sydney, Australia, to Barrow, Alaska, from Buenos Aires to Ulan Batur.
You can live in it full-time or lease it long-term (with possible restrictions; see below). You can sell it through a real-estate agency. You can walk away and give it back to the bank.
The main difference -- ownership-wise -- is this: You can also rent out your unit by the night though the hotel-company’s reservations and management systems. This concept seems to be most successful for people who want to own an actual second "home" (and not a fractional or timeshare unit) in one of the country's favorite vacation destinations, with the potential of a regular return on investment through nightly rental income.
MGM Grand, Trump Tower, CityCenter, and Planet Hollywood are among those in the hotel-condo business in Las Vegas. (Cosmopolitan will be next month when it opens.) By contrast, strictly residential condominiums, such as SKY, Panorama, Turnberry, and Allure, all have three- to six-month rental minimums.
As far as living restrictions are concerned, some condo-hotels, also known as buy-to-let hotels, condotels, and apartotels, constrain the length of your stay at any one time. These restrictions can be legally imposed by local government or policy imposed by the developer. Signature at MGM Grand, to use your example, has neither legal nor policy restrictions, meaning you can actually live full-time if you own a condo there.
If you don't live there full-time and opt to include your unit in management’s rental program, you receive a portion of the income earned, which offsets your costs of ownership (most vacation homes are financial drains). The management company takes reservations, handles the transactions, and cleans and maintains your unit. It also attends to the smooth operation of the hotel's amenities and services.
Every condo-hotel has its own rental program. Typically, you can occupy your unit whenever you want, as many nights during the year as you want (depending on living restrictions); the only cost to you when you do, usually, is a cleaning fee. The management company requires a certain amount of advance notice that you want to stay in your unit (30-60 days, generally), but most seem to be flexible enough that they’ll accommodate you on short notice if your unit isn’t rented out.
A condo-hotel isn't like a timeshare, where all the units are the same and it doesn’t matter which unit you stay in. In a condo-hotel, you own an actual unit and that’s where you stay when you want to. However, all condo-hotel units in the rental program come pre-furnished in order to maintain strict consistency for overnight guests. Many units have dedicated storage areas that allow you to store things you need when you stay there, so you don’t have to keep carrying all your stuff back and forth from home. Signature at MGM, again as an example, advertises locking "owner’s closets."
Rental revenues are paid out, usually, four times a year and your cut of the income can be anywhere from 20% to around 85%, depending on deduction variables. Our research shows that the split is typically 50-50, minus around 10% for management and cleaning fees. Signature, again, specifies a 60%-40% split, with the 60% going to the owner, though it deducts a 10% fee, so it’s even-Steven.
You’re usually not obligated to use on-site management; you can handle all the rental details yourself, through such websites, for example, as VacationRentalsByOwner.com. This way you’re not limited to taking what you can get from the management company, which usually doesn't guarantee that your unit will be rented.
We highly recommend you study the contract with a big magnifying glass, and do your due legal, accounting, and logistical diligence before signing on any dotted line. The hotel business is notoriously unstable and occupancy rates are highly sensitive to micro and macro economic factors (as the number-one value in LVA's Top Ten for the past two years, room rates, shows).
In addition, because of the rental-income potential, condo-hotel units tend to cost up to double what regular condos cost and these days, condo financing is anything but smooth sailing. You’ll also have the usual real-estate expenses: mortgage, taxes, and insurance, plus condo-association fees that cover upkeep of common areas and other shared expenses.
Definitely try to talk to other owners to get first-hand accounts of the ownership experience; in fact, if anyone out there in QoDland owns or has experience with one and wants to share, we'll pass along the info. Also, shop around with a vengeance. Although pre-construction prices for these units have been slashed by up to 30% at CityCenter, for example, condos there are still going for up to $700 per square foot at Veer and Vdara to about $1,000 at the Mandarin. And though Trump has announced a 50% price reduction at his Tower (starting in early December), a peek reveals many units still priced in the millions there.
It might take some serious looking, but undoubtedly, you can find at least one distressed property selling at a steal. A good place to look online is LasVegasCondoExperts.com.
