The balance of lifestyle and investment in a second home.
The balance of having a second home cover its running costs and even make money while enjoying the lifestyle of having a home in the sun is the perfect solution for many clients. This approach is resonating with today’s real estate purchaser market by helping them justify a purchase decision today. Here is a look at some of what Barbados has to offer.
There are two general approaches for meeting the balance of lifestyle and investment. First is a condo-hotel; where the developer will usually limit the amount of time an owner can stay in the residence and rent the balance of time as a hotel. The developer shares the rental revenue earned in a hotel rental pool with the investor. The second approach is when the developer provides unlimited use by the owner and the option of participating in a rental pool or a lease-back of the homes to the developer for a period of time. The proportion of rental revenue shared is decreased by the amount of time and adjusted for the seasonality of the time used by the owner. A lease-back is when a developer sells a property and agrees to take it back to rent for a period of time and cover the operating costs for the owner. The developer either offers a discount upfront or a percentage return on the investment to the owner for the period of the lease-back. Typically the properties with a rental pool or lease-back offering have hotel services and resort amenities available to allow for increase occupancy, rental rates and most importantly enjoyment of use!
Three condo-hotel developments offering units for sale are Beach View, Ocean 2 Resort and Residences and The Sands. Other developments are coming on the market, such as Summerland hotel in Prospects St. James, that is in development and projecting 4-8% returns on investment for 1 bed and studio apartments priced from US$250,000.
Beach View in Payne’s Bay allows owners up to 3 months’ usage of their 2 and 3 bedroom suites and villas. Beach View is a very successful example of a mature and profitable hotel rental pool. They are generating significant rental income and return on investment for their clients. Beach View is moving from strength to strength -- from the original 36 Beach View units to the 19 new Ylang Yland Villas and Passion Fruit Suites priced from US$575,000.
Ocean 2 Resort and Residences on Dover Beach is another example of a successful condo hotel model. Priced from US$400,000 for 1 and 2 bedroom apartments they have unlimited usage for owners but with a two week restriction on peak dates. The revenue share of the pool is based on the revenue of the room and not the profit of the room and Ocean Two has consistently high year round occupancies of 75% or higher for their last five years in operation.
One of the newest condo hotel projects is The Sands located in Worthing, with 87 studio, 1, 2 and 3 bed condominiums available. They offer up to 3 months usage and a share of the rental pool. Still under construction, this hotel is the only all-inclusive condo hotel in Barbados.
The second approach to balancing investment and lifestyle is available with Crane Resorts and Royal Westmoreland.
The Crane Resort tapped into the “balance of the heart and mind” in making a purchase decision over 15 years ago and has used it as a linchpin in their successful value proposition. They offer 1,2 and 3 bedroom condominiums and villas at The Crane Resort and their second location at Beach Houses, both in St. Philip. Crane Resorts rental pool allows clients to use what time they want without restriction and to deposit the time they do not use in the hotel rental pool. The rental pool has been a reliable tool to pay the property expenses in a turbulent market, covering all costs of operation even in the depths of our recent recession.
Secondly, Royal Westmoreland in St. James successfully launched this winter a lease back opportunity for their 4 bed semi-detached villas with private pools and their 3 bed Royal Apartments. Their lease-back opportunities offer the homes furnished, with all expenses paid for 4 years including the sought after full golf Club Membership. The developer has taken anticipated revenue from the rental period up front, off the purchase price and has removed all operational costs of the ownership. The owner can access the villa for 4-6 weeks a year, or more, if they reduce the amount of anticipated revenue taken off the purchase price. Clients have been motivated to make a purchase decision earlier to capture the discount and lower the risk of ongoing running costs. The owners end up with a newly built home that they can continue to rent at the end of the 4 years or keep the home private for their friends and family to enjoy.
These developers have been creative in helping their clients balance the need for their lifestyle benefits and yet lower the financial risk in having a second home. This has allowed many clients to justify a purchase decision today, that they would otherwise have put off. This approach to real estate development helps clients and of course brings significant economic and social benefits to Barbados. These benefits range from much needed updated rental stock, year-round employment, and of course the benefit of increased foreign exchange. Now that’s a win-win for all.