Condotel Financing 101 Guide: All You Need to Know

Before diving into the topic of condotel financing. Let’s first understand the terms that are gaining much attention in the real estate industry – condominiums and condotels. 

In the real estate industry, people sometimes use these terms alternatively, but they are distinct.

In the last few years, Condotel financing has gained much popularity and become increasingly popular. 

Condominium, often referred to as condos, is a type of property ownership where individual units within a larger multi-unit building or complex are privately owned. In contrast, condotels are individual units that private individuals own. 

 Read on, and let’s unravel these terms in depth in this post!

Condotel (Condo-Hotels) vs. Condominium (Condos)

Many people get confused between condotel and condominiums as they sound similar, so people think they are the same thing, which is not true as they offer different features. Let’s explore and know the difference:

In condotel, private individuals own individual units, and these units are typically part of a large hotel or resort. On the other hand, condominiums are multi-unit residential buildings where private individuals own individual units. 

On the management front, condotels are managed and operated like hotels, whereas condominiums are managed by condo associations or homeowners’ associations (HOAs). 

Concerning amenities and services, condotels offer hotel-like amenities and services such as housekeeping, front desk services, room services, and access to facilities like pools, spas, and restaurants. While condominiums may offer amenities like gyms, swimming pools, and common areas, they generally do not provide the extensive range of services found in condotels.

The occupancy of the condotel unit owner is restricted, and its main purpose is to generate rental income from the property. Condominium owners experience greater flexibility in how they use their units, such as living in them full-time, using them as second homes, or renting them out long-term. However, some restrictions may be imposed by the condo association’s by-laws. 

Another point of difference is their income potential. Condotel owners can generate rental income on a short-term lease basis and help offset their ownership costs. However, certain factors affect their income potential, such as location, management, and market demand. In contrast, condominium owners can generate income on a long-term lease basis.

Condotel Financing

As we discussed, a condotel is a unique property that combines a condo and a hotel, requiring different financing and allowing for rentals. 

Condotel loan has their own set of challenges as it is non-traditional financing, and people usually find it difficult to search for these types of financing models. To finance a Condotel, specialized lenders are needed as big banks usually don’t underwrite them.

Other factors contributing to the complexity of condotel financing for borrowers include:

  • they face strict eligibility criteria, 
  • higher down payment requirements, and 
  • potentially higher interest rates 

And because of all these reasons, lenders consider it a higher-risk investment.

Borrowers looking for financing options for condotel units may need to explore specialized condotel loans or even commercial loans. Also, these loans may have their terms and conditions tailored according to the condotel ownership and rental income potential.

Lenders of condotel financing scrutinize the operational management of condotels. It also assesses the financial stability and experience of the management company overseeing the property and the property’s rental history and income potential.

Understand the differences between Hard Money Loans vs. Mortgage

How do condotel loans work?

Condotel loans do not meet the requirements of traditional mortgages. That’s why they are considered non-traditional loans, but still, they require you to meet some of the income, assets, and credit score requirements. 

The loan requirement focuses more on the property and the buyer and once those special requirements of lenders are met, the loan follows the same process as that of the traditional loan.

Non-Warrantable Condo Loan

Non-warrantable condos are condominium properties that do not meet the eligibility criteria set by government-sponsored entities (GSEs) like Fannie Mae and Freddie Mac. 

These criteria can include various factors like issues related to the condo association’s finances, occupancy ratios, or other considerations.

As non-warrantable condo loans do not meet the GSE guidelines, they are difficult to finance through traditional means. Because of this, borrowers may need to seek non-warrantable condo loans, which are specifically designed for condo properties.

Not all lenders are willing to finance non-warrantable condos. These specialized loans are offered by portfolio lenders who are more open to financing such properties.

Just like condotel financing, non-warrantable condo loans are also not that easy to get financed as these loans have different underwriting criteria than traditional loans, require larger down payments, and have higher interest rates.

Lenders may conduct more thorough due diligence on non-warrantable condo projects, and assess factors like financial stability and insurance coverage.

Financing for a non-warrantable condominium has the same basic loan standards and allowances as you see with a condotel.

You might also like: Top Commercial Real Estate Lenders of 2023


Both Condotel Financing and Non-Warrantable Condo Loans cater to unique real estate situations that are different from the typical condominium financing model.

Borrowers who are interested in these types of properties should buckle up as these financing processes are complex. It’s also advisable to work with experienced lenders in these specialized loan types.

Additional Resources

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top