Port Carling, ON (August 09, 2011) — The Muskokan Resort Club, a Muskoka fractional ownership resort development of luxury villas on prestigious Lake Joseph, has issued a guide to help potential purchasers, to make them aware of the complexities and the issues involved when investing in a vacation home that is part of a mixed use development.
“There are some key questions and research that should be done when considering investing in a fractional vacation home located in a mixed use development,” states Walter Prychidny. Walter Prychidny is President of Resorts Muskoka Ltd., the developer of the Muskokan Resort Club. Resorts Muskoka also owns and operates resort properties as well as acts as exclusive consultant for other high end fractional developments. “Apart from a satisfying location, the price point and quality of the fractional vacation home, investors should be aware that the other businesses that form part of the development, typically hotels and restaurants, will definitely have an impact on the value of the fractional home and the enjoyment of its occupants. The value of a fractional vacation home investment will be directly linked to the success and quality of these businesses. There are a number of things investors should consider,” says Prychidny.
When hotel and restaurant operations are part of mixed use fractional development, like it or not, the investor becomes a “partner” with the hotel /restaurant owner. Prychidny urges investors to ask: “Who is the hotel/restaurant owner? What is his experience? Is the owner well funded? Is it a long term investment for the owner?”
“The investor must determine whether their interests are aligned with the hotel.” says Prychidny. “Do they intend to time share or fractionalize the hotel component? Investors should determine the annual occupancy of hotels in the area. As a general rule, if hotel occupancy is less than 60% in highly seasonal locations- the hotel may not be producing the type of the returns to justify the investment. Potential fractional owners should be wary of these situations as the hotel/restaurant may be incurring operating losses.”
Another thing to consider is the brand of the hotel or restaurant and its affect on value.
“Does the brand of hotel/restaurant reflect the price/value of investment? If the brand is changed (downgraded) how would this the investment? Do the fractional owners have a voice in approving any brand change?”
Investors should think about where the hotel or restaurant is physically located on the site and whether this might present security issues re transient hotel/restaurant guests. Other points to consider are: What are the hours of operation of the restaurants? Will there be noise issues if hotel caters to conventions or other group issues? Are parking areas shared? Is the hotel a focal point of the development?
A key factor in purchasing in a mixed use development is whether the investor shares common areas with hotel and if so, how are maintenance fees calculated and shared. As a general observation, maintenance fees are higher for fractional vacation homes which form part of a hotel complex. “Investors should ask questions such as: Who owns the common areas (driveways/parking/lighting/security/landscaping)? How are the costs allocated and how are maintenance fees allocated?” adds Prychidny. “Square footage is generally used to share costs, but the actual volume of space that is being heated or cooled is never taken into account, therefore investors should consider whether there are separate meters for utilities.” Hotel main floors can have ceiling heights in excess of 20 feet, including the check in area, convention meeting spaces, corridors, break out areas and restaurants. It costs much more to heat and cool those spaces than a 9 foot condo ceiling height. Electricity charges for hotel related areas that remain lit on a 24 hour basis can be high, so investors should ensure that the hotel pays its fair share. “As well,” states Prychidny, “maintenance and security costs will be higher due to the hotel operations, so investors should find out how they allocated. Landscaping and extra lighting expenses are other expenses to ask about. Also, investors should ask how major repair items like roof repairs, parking, underground parking, Are common expenses included in the reserve fund? Are they higher due to increased wear and tear caused by hotel operations?”
Investors should find out whether their fractional unit is part of rental pool and if participation is mandatory. If there are there use restrictions for owners, will the investor be satisfied with the restrictions and do they match your vacation pattern? Prychidny suggests investors, “ask about how the rental income is split and whether all units are pooled or just specific units.” He adds. “if the investor purchases the best unit and it is always rented but the income is shared with all owners, does the investment make sense or is the individual better off buying a lower unit and sharing the same income. Ask how the management fees are calculated – as percentage of gross revenues or a percentage of profit – and who absorbs any operating losses of the hotel operations.”
About The Muskokan Resort Club: The Muskokan on Lake Joseph, offers affordable and carefree Muskoka vacation living where club owners purchase a 1/10 share of a luxury Muskoka cottage to enjoy for five weeks every year. With magnificent lakeside villas and extensive resort recreational amenities on 42 scenic acres, the Muskokan Resort Club is Muskoka’s premier fractional ownership resort club. To enjoy affordable boat ownership during their resort stay, Muskokan Resort club members may join the Muskokan Boat Club. To learn more about The Muskokan Resort Club and the advantages of owning a luxuriously appointed, lakeside vacation villa with private spa pool, call toll-free 1-866-960-9016 or visit the website (http://www.muskokanclub.com).
The Muskokan Resort Club
3876 Hwy 118 West
Port Carling, ON P0B 1J0
SOURCE: The Muskokan Resort Club