Hard Rock Condo-Hotel ROI

Posted on September 24, 2010 | by Denny Oh

Ive been talking to a lot of people about the Hard Rock Hotel here in downtown San Diego lately.  In the past, these condos didnt make much sense, because they were priced pretty high and you needed very high occupancy rates to make any money.  Now, these condos seem to be a pretty good bang for your buck.  In the last 12 months, 10 condos have sold at the Hard Rock Hotel.  The sale prices range from $160K-240K.

Based on my calculations, the studio units at the Hard Rock are generating about 4“6.5% return each year.  Most of the studios have recently sold for about $170“180K and bring in about $18“20K a year, based on what Ive seen and heard.  The $18“20K a year, is after the hotel takes its share for management fees, etc.  The owner would have to spend another $750 or so a month to pay for HOA dues and property taxes.  So, being conservative, lets say you only made $16K from the rental revenue in one year.  Deduct an additional $9K for HOAs and taxes and you end up with $7K profit.  Based on a $175K sales price, thats a 4% annual returnnot bad considering your other options.

Now lets be optimistic and assume you get $20K in rental revenue in one year.  This would net you $11K, or 6.2% return.  I dont know much about other investments, but Im pretty sure a 6% return isnt a bad deal in todays economy.  And from what Ive seen so far, this year is better than last year(in terms of rental revenue at the HR) and I certainly cant see it getting worse.  If youre interested in the Hard Rock Hotel, or other real estate in San Diego, please let me know.  Or if you think real estate isnt a good investment, maybe you can go and buy a $1.7M penny.

Denny Oh 858“243“2092 [email protected]

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  1. John says:

    “Most of the studios have recently sold for about $170 to 180K and bring in about $18 to 20K a year, based on what Ive seen and heard.”

    Hi Denny, I have a question. Would potential buyers have access to occupancy and rate information for the unit for sale? I would be curious to see a statement showing how many nights the unit was rented the previous year, what the per night rate was, etc.

    Thanks in advance for letting me know if this information is available.

  2. Denny Oh says:

    John – the hotel does not allow agents to discuss this anymore. I’ve never looked at occupancy rates, but income has gone up since I wrote this post. Feel free to call me. 858-243-2092

  3. Tony says:

    Hi Denny,

    I understand that agents are not allowed to discuss occupancy, rates, etc. However, you state that income has gone up.

    Can buyers view a revenue statement from the seller of the unit, to see how much money it has brought in for the previous year?

    Thanks Denny.

  4. Denny Oh says:

    Hi Tony – owners can share whatever they want (I don’t believe there are any restrictions with the hotel) with buyers. I’ll email you as well. Thanks.

  5. Tony says:

    Great, thanks for the information Denny!