Guide
The Benefits of Owning a Unit at a Resort
“I could live here,” is usually uttered at least once during a fantastic vacation at a beautiful resort.
Between the stunning scenery, prime location, and plentiful amenities, who wouldn’t want to come to paradise whenever they’d like? Many are now making that dream a reality by owning their own unit at a resort.
Many resorts and hotels allow investors to buy a unit(s) at their property. The biggest perk? You now have your own vacation home in a beautiful area. When your unit is not in use, the hotel will rent it to other guests, and you’ll receive a percentage of the booking revenue. Essentially, you will earn passive rental income without the hassles of managing a rental property.
How Does it Work?
When looking to build capital, hotel and resort developers will often find investors by putting up units for sale. Once you buy a unit, you then let the resort or hotel manage the unit and you then receive a percentage of the booking revenue (typically 50%, or more).
This is an excellent type of investment for both seasoned and new investors interested in diversifying their portfolios. Investing in reputable and known hotel and resort brands is a safe way to get started, as these companies are usually more reliable and have done their research to ensure the hotel will have every opportunity for success.
Hassle-free Management
One of the biggest benefits of owning a unit at a resort is that the hotel or resort will handle everything related to renting out your unit. They will take care of the following (at a minimum):
- Booking
- Marketing
- Guest Services including managing reservations
- Check-ins and Check-outs
- Cleaning Services
- Furnishings
- Maintenance
Perhaps the greatest advantage is that they’ll take care of any guest issues or complaints!
One notable consideration is that all expenses are typically incurred by the unit owner, not the hotel or resort. This is also true of unit upgrades and/or capital improvements. That being said, with this structure it is still possible to purchase a highly profitable unit(s).
Obviously, accurate underwriting is key, where an experienced broker can help.
Living in Paradise
Whether you love the tropics or the beauty of the mountains, you pick your paradise. Depending on your agreement with the hotel, you can then choose when you get to stay at your vacation home. The hotel may assign a specific time and number of weeks when you can stay to ensure the unit is available to be rented out to other guests.
Either way, you have a guaranteed getaway in a beautiful destination.
Owning a resort unit in a prime and popular tourist location will also benefit you in the long run. Typically, resorts in desirable areas appreciate in value over time. And as demand increases, you see will see higher revrnues.
Luxury Amenities
Owning a unit in a luxury resort means you’ll be able to utilize all of its luxury amenities. Enjoy access to the pools, saunas, and hot tubs. Often, the resort will also issue credits for food and beverage and spa services.
Plus, you can take advantage of its concierge services and explore a beautiful area, set up tours, or indulge in recreational activities from snorkeling to golfing and more.
So, the next time you’re on vacation and you find yourself thinking, “I wish I didn’t have to leave,” now you know you don’t have to. Not to mention, you’ll earn some passive revenue to invest in your next vacation!
Fractional Shares versus Timeshares
When you decide to purchase a unit at a resort, it is what’s called fractional ownership or fractional shares. Not to be confused with a timeshare, fractional ownership differs in that you own an actual share of the property.
With a timeshare, you only have rights to blocks of time to use the property. Additionally, those blocks of time tend to be more restrictive with a timeshare, allowing you to only vacation there for one to two weeks on average, whereas with fractional shares, you typically can stay at the unit for five or more weeks.
Plus, a single unit with a timeshare could have up to 52 owners versus fractional ownership, where most properties will limit it to 6-14 owners per unit.
Equity & Flexibility
Unlike a timeshare, fractional ownership also provides an opportunity to gain equity. And if you ever want to sell, fractional ownership offers easier exit strategies than timeshares, where you might run into more restrictions from the timeshare company.
Overall, fractional shares allow more flexibility and freedom with the property. With timeshares, owners have no role in management and must pay maintenance fees and annual taxes that are subject to increase each year. Fractional ownership, on the other hand, affords you more agency over maintenance, including upgrades and improvements.
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