Don't Be Mis-Informed About Las Vegas High Rise Condo Hotel Legalities and Requirements

This really isn't what I wanted to devote my final post of 2007 on, but there's been a lot of confusion lately in the Blogosphere and in the Las Vegas high rise condo hotel marketplace in general regarding what actually constitutes a "condo-hotel" versus a strict condo and what high rise condo hotel purchasers really need to know before they make an investment decision in any condo hotel project in Las Vegas (or anywhere for that matter).

Let's address the matter of whether you can actually live in your condo hotel unit or is there a requirement to continually rent it out? The answer is a definite yes - you can live in your own unit whenever you want to. There's no stipulation that says because a condo project is designated as a "condo hotel" that it must be used 100% for investment purposes. I've seen this being incorrectly posted in a number of blogs lately and it's giving prospective purchasers the wrong idea of both their ability to use their unit for themselves as well as the potential cash flow they can derive from it.

And speaking of cash flow, according to the SEC it is ILLEGAL for any real estate agent to make ANY representations of how much money or what kind of rental rates your high rise condo hotel will command. Illegal! Yet, I see and hear (and read on blogs) many times agents telling people they can get "X" amount of rent per night, thereby giving investors an inaccurate, irresponsible, and illegal representation of things to come.

Also, as I mentioned in a previous post - and commented highly by many of my high rise blog readers via email - purchasers of high rise condo hotels are in no way obligated to use the rental management company associated with the high rise condo development. As such, Trump unit owners do not have to rent their units through the Trump rental management program if they don't want to (thank your stars for that one!). Condo hotel owners are free to choose any management company they desire (or do the rental management themselves).

Read this and understand it well: Developers of Condo hotels (and the real estate agents and brokers selling those properties), can not:

• Advertise that the condo hotel purchaser will make a profit on his/her unit.
• Discuss rental agreement terms until after closing (which is a big catch-22 because you don't want to make the investment until you know the return, but you won't know the return until you make the purchase!)
• Impose any restrictions on the owner's use of their unit or make the rental program mandatory.
• Offer any guaranteed minimum return for any set period of time.

Now these aren't my rules, or Nevada's rules for that matter. This is coming straight from the Security Exchange Commission (SEC) which if not followed will make your condo-hotel be considered a security which needs to be registered and will probably result in significant obstacles, time delays, and additional expenses when you eventually go to resale. Not including federal securities law penalties!

There's so much misinformation out there regarding these investments, it would be wise of those considering the purchase of high rise condo hotels to only work with agents who truly understand the implications and workings of the law regarding these properties as dire consequences await for both the buyer and the real estate professional who choose to ignore what the market requires.

So what's the difference between a hotel unit owner and a residential unit owner? This link should be of help. Or if you don't feel like reading through it all, just contact us and you'll get the true scoop of everything high rise condo wise, and not from those other bloggers and agents who are giving you pie in the sky nonsense.

You can also get further info on this topic by reading James Norman's article on the subject at the Holland & Knight website. Condo hotels are still relatively new investments, but their popularity is growing rapidly. Just know the correct facts before signing that contract...