Phoenix Cashing In On Condotel Trend

A small Phoenix hotel is hoping to cash in on a burgeoning tourism trend by converting to condominium hotel units, according to the Arizona Republic.

Pending approval by the Arizona Department of Real Estate, the InnSuites Phoenix Best Western Hotel and Suites is renovating rooms and will start selling them this summer. This trend has recently caught fire in portions of the South Florida real estate market, such as the Keys, where land is scarce and investor demand is high. Arizona is also one of the nation’s fastest-growing housing hotbeds.

The Phoenix hotel has already has done presales on the 109 so-called “condotels” and held an informational session for buyers and real estate agents. Prices start at $169,900, with the mini-homes coming in two sizes — a 276-square-foot studio and a two-bedroom unit double the size. The latter will start at about $250,000, and both will carry an association fee.

“There’s been an unbelievable amount of interest. It’s very hot in Florida and Hawaii. We think it’s going to be hot in Phoenix,” said James Wirth, president of Phoenix Northern Resort LLC, the condo developer.

He’s not just talking about the weather, either. Wirth is also the CEO of the Phoenix-based company which owns and manages or licenses 11 InnSuites hotels in Arizona, New Mexico, Texas and California. InnSuites has long wanted to upgrade the hotel but couldn’t afford to given the soft tourism market in recent years. Having it converted into condos makes that possible, especially given the property’s scheduled high-end renovations.

The condotel trend has picked up steam in the area recently. It is a by-product of the condo conversion craze that has gripped certain areas of the country, where developers are furiously turning complexes into condos to cash. The sizzling Arizona real estate market is a prime target, experts say. Still this segment of the investment market is so small — less than 1 percent — that the National Association of Realtors doesn’t track statistics on it.

Converting moderate hotels into condos makes them affordable for people with less money to invest. Unlike a timeshare, in which the buyer has the right to use a unit for a set number of weeks annually, condotels are sold more like a permanent homes. Buyers at the Phoenix InnSuites will have access to their any time and will own a fraction of the property. They can use the unit as a temporary vacation home, while putting it into the hotel rental pool and receiving income the rest of the time.

This trend and other condo conversion variations have become extremely popular in the Sunshine State of late. With prime Florida real estate harder and harder to find, investors have even turned to renovating old cruise ships. While the condotel concept is far from perfect, if you are an investor with limited capital, or are looking to purchase a secondary home that won’t break the bank and entails limited maintenance, you might consider applying for a Florida home loan while mortgage rates are low.