Warning: Before You Buy in a Condo Hotel

If you are ever tempted to buy a unit in a condo hotel (aka a "condotel"), including at the Trump International Hotel & Tower in Chicago, do your research first. A good place to start is this helpful article by Steve Bergsman at Inman News.

Warns Bergsman, a real-estate author based in Arizona: "This product has been on my watch list as one of the worst real estate investments ever created for the simple reason that it is really just a financing mechanism for the developer and for all practical purposes, caveat emptor, which in today's world means let the buyer be damned.

"Basically," explains Bergsman, "a condotel works like this: An investor buys a condominium in a hotel building and then allows the hotel to use the unit for guests when the owner is not in residence. The sales pitch suggests the buyer will recoup investment costs and fees through the daily rental of the condo unit by the hotel, which, by the way, rarely ever happens.

"Even if you wanted to buy into a condotel today," he concludes, "it's doubtful you could find a bank that would finance this loan. Lenders have come to view a condotel mortgage as a high-risk investment."