Pre-sell condotel units before acquiring or purchasing existing motel

[Martin Mark]

I am looking to purchase an existing motel to renovate and turn into a condotel...where the individual units become condo units, and the motel still runs like a normal motel to guests.

How can I legally pre-sell the units before acquiring or purchasing the motel? What kind of details would I need to give as to location of where the units are to prospective buyers of the units...meaning, is the city/town and descriptive of what its near good enough? How are things structured legally so that upon my purchase of the motel building and property, the deposits on the condo pre-sales are released to me?

Obviously the actual sale of the units is not occurring here, but a way of securing interested buyers and deposits released at some point.

Kind regards...

 

[quincy]

I am looking to purchase an existing motel to renovate and turn into a condotel...where the individual units become condo units, and the motel still runs like a normal motel to guests.

How can I legally pre-sell the units before acquiring or purchasing the motel? What kind of details would I need to give as to location of where the units are to prospective buyers of the units...meaning, is the city/town and descriptive of what its near good enough? How are things structured legally so that upon my purchase of the motel building and property, the deposits on the condo pre-sales are released to me?

Obviously the actual sale of the units is not occurring here, but a way of securing interested buyers and deposits released at some point.

Kind regards...

What is the name of your state?

Let me get this clear: You want to sell motel units as condos before you own the motel and turn the units into condos?

 

[adjusterjack]

Hmm. Sell something one doesn't own? I think there's a word for that. FRAUD.

 

[quincy]

Hmm. Sell something one doesn't own? I think there's a word for that. FRAUD.

So ... does that mean I can’t sell you a beachfront house I don’t own? It’s really pretty, great views.

 

[adjusterjack]

So ... does that mean I can’t sell you a beachfront house I don’t own? It’s really pretty, great views.

Could I interest you in a trade? I have a nice profitable bridge over the East River in NYC that I can offer you.

 

[quincy]

Could I interest you in a trade? I have a nice profitable bridge over the East River in NYC that I can offer you.

A trade might be possible ... but I don’t want a bridge. Do you have a motel?

 

[STEPHAN]

You should familiarize yourself with the condo conversion laws, they are pretty strict.

 

[Zigner]

You should be speaking to an attorney and a tax pro of some sort, not to mention a business advisor, in your unnamed state.

 

[Taxing Matters]

Hmm. Sell something one doesn't own? I think there's a word for that. FRAUD.

In at least some states it's legal to do if you do it right.. The best way to do that is either get a payment to hold the unit when it becomes available or, if an outright sale is done, the sale needs to be contingent on the seller being able to deliver the unit by a specified date, and disclose in the written sales agreement that the unit has not yet been purchased, it is not certain that the deal will close, nor is it certain that the seller will get the permits needed for the conversion. In either case, there should be a clear provision for a refund of the money paid by a certain date if the deal can't be completed as planned. In other words, full disclosure of what is going on with a clear plan for refunding the money if the deal collapses will generally suffice to avoid fraud charges, assuming the seller does follow through with tranferring the unit to the buyer or refunding the money.

 

[adjusterjack]

In at least some states it's legal to do if you do it right..

Yeah, I know, it's like short selling stock. Sorta. Ish. If you don't do it right, you take it in the shorts. That's how short selling got its name.

Anyway, Tax, we're beyond serious now and into joke territory.

A trade might be possible ... but I don’t want a bridge. Do you have a motel?

I stayed at a Holiday Inn once (I really did - Nov 2 1972). I can trade that. But I think it's worth more than your beachfront property. Got anything else to go along with it.

 

[quincy]

... I stayed at a Holiday Inn once (I really did - Nov 2 1972). I can trade that. But I think it's worth more than your beachfront property. Got anything else to go along with it.

I just ordered pizzas. I could include one in the trade.

 

[adjusterjack]

Pizza.

It's a deal.

I'll have my cousin Vinny draw up the papers.

 

[Martin Mark]

In at least some states it's legal to do if you do it right.. The best way to do that is either get a payment to hold the unit when it becomes available or, if an outright sale is done, the sale needs to be contingent on the seller being able to deliver the unit by a specified date, and disclose in the written sales agreement that the unit has not yet been purchased, it is not certain that the deal will close, nor is it certain that the seller will get the permits needed for the conversion. In either case, there should be a clear provision for a refund of the money paid by a certain date if the deal can't be completed as planned. In other words, full disclosure of what is going on with a clear plan for refunding the money if the deal collapses will generally suffice to avoid fraud charges, assuming the seller does follow through with tranferring the unit to the buyer or refunding the money.

Yes, exactly what I was asking about. Nothing to defraud whatsoever. Thank you.

Is this legal in New Jersey?

 

[quincy]

Yes, exactly what I was asking about. Nothing to defraud whatsoever. Thank you.

Is this legal in New Jersey?

If done properly, it can be.

You should find an attorney who specializes in commercial real estate (land use, zoning, construction) and you will need an architect/engineer for conversion plans. You have to not only meet all condominium regulations when implementing your proposed conversion and sales but you will also have more than a few bank funding hoops to jump through.

And, of course, you have the challenge of finding buyers who can be convinced that your project is worth investing their money in, especially when you haven’t invested in the initial purchase of the motel.

Are any of the motel rooms currently being used as long-term rentals?

 

[Martin Mark]

Thank you again. I do appreciate this.

Currently it runs as a straight motel, so not long-term. It would continue as such to guests whenever an owner of a unit puts it into the rental pool, and they are not using it for themselves.

I have been redesigning the units in renderings.