Inside Gaming Column: Condo Craze on Strip Makes Sense - Monday 6th of February 2006

A lot of readers have been asking what sense it could possibly make for anyone to spend $500,000 for a little unit, possibly 600 square feet, in one of the condo-hotels being built or proposed in Las Vegas. Besides that similar units go for $1,000 a square foot in Manhattan or Miami, accountants say it actually makes a lot of sense.

Of course it makes sense for developers, especially if they are short of the $1 billion-plus to finance a project. They can rake in the revenue from the sales of the units to pay for construction, and make their profits on offering rooms and amenities such as casinos, restaurants, shops and shows.

It may also make sense for companies looking for executive and corporate retreats.

But readers are wondering about the men and women in the streets, people like us except that they have some free cash to make a new investment. This is where the arithmetic works out so nicely.

The payoff, of course, depends on occupancy and the rental split. In Las Vegas, occupancy rates approach 100 percent and the buyer's share of rental income can range from 30 percent to 60 percent.

Say, for example, one of these hotel condos costs $500,000, a price on the low side of the current market. That might cost a buyer $29,695 in yearly mortgage payments with a 20 percent down payment of $100,000 on a standard 30-year mortgage at 6.3 percent.

That still seems pricey, but stay with us.

The buyer should get $45,000 in rental income, providing the owner's take is 50 percent on a room that rents out 300 nights a year at $300 a night, less $9,000, or $750 a month, in fees. That's an annual return on investment of 6.4 percent.

Plus the buyer's personal use of the hotel condo for 65 nights, or two months a year, would be worth $19,500 in savings on vacations, or the buyer could earn that in rental income if the unit was rented out.

The promised total return of 28.5 percent beats just about any other investment generally available.

The added upside is that Las Vegas real estate may keep appreciating, although accountants warn against including estimates in any personal financial analysis.

The biggest risk is filling all those rooms at $300 a night. If room rates go belly-up, profits could disappear.

But with the Stardust, one Tropicana tower and Circus-Circus all likely to go off the market as the Boardwalk recently did, rates are more likely to beef up than to take a dive.

The big question for the consumer is that hefty down payment, which many investors seem able to handle.

The big questions for the market are faith in Las Vegas will the bloom stay on the rose and can construction costs be held in check well enough for the economics to keep making sense.

Gaming Wire Editor Rod Smith can be reached by e-mail at rsmith@ or by phone at 477-3893.

Other news from around the same time

NexLearn Develops Poker Program - Tuesday 24th of January 2006

KANSAS – E-Learning solutions company NexLearn, LLC, has developed the "Palms Home Poker Host,....

Pinnacle Optimistic About Biloxi - Tuesday 24th of January 2006

JACKSON, Mississippi – As reported by the Biloxi Sun Herald: "Alain J. Uboldi, the chief operatin....

Washington Gambling Taxes Repealed - Tuesday 24th of January 2006

QUINCY, Washington – As reported by the Columbia Basin Herald: "The Quincy City Council on Tuesda....

Atlantic Lotto CEO Defends Practices - Tuesday 24th of January 2006

NEWFOUNDLAND – As reported by the CBC News: "The head of the Atlantic Lottery Corp. was grilled f.... Releases Odds on Miss America Pageant - Tuesday 24th of January 2006

SAN JOSE, Costa Rica – Online gaming entertainmentfirm, today released its odds on the ....

DEQ Systems, TCS John Huxley Sign Deal - Tuesday 24th of January 2006

PRESS RELEASE) DEQ Systems Corp. (TSX-V: DEQ)and globally renowned TCSJohnHuxley announced today t....

World Poker Tour, Commerce Casino Media Tournament Begins - Tuesday 24th of January 2006

–Here's your shot to show you have the right the World PokerTour/Commerce Casino Media ....

Political Foes Unite Over Casino Issue - Tuesday 24th of January 2006

KANSAS – As reported by the Lawrence Journal-World: "They say politics makes strange bedfellows."....

Earnings: IGT Profits Dip, Top Target - Monday 6th of February 2006

LAS VEGAS Slot machine giant International Game Technology reported both reduced earnings and reven....

Oregon Casino Study Touts Jobs, Revenue - Monday 23rd of January 2006

Backers of a proposed casino in Wood Village are promoting a new study that says the facility would ....