Written and reviewed by Jack Gladden, Senior Loan Officer, NMLS #1470164
Updated · 7-minute read · How these guides are written
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Condotel and short-term rental loans in brief
- What a condotel is
- A condo unit in a building run like a hotel: front desk, short stays, a rental program. You own the unit; the operator can rent it when you’re away.
- Why it’s different
- Fannie Mae and Freddie Mac won’t buy loans on hotel-run buildings, so most banks can’t lend. Specialist lenders can.
- Typical terms
- Often 20–30% down, strong credit and reserves. Second homes and investment properties, not a primary residence.
- Rental income
- Some programs count the unit’s rental history or a projection; others qualify you on income or assets.
- Short-term rentals
- A house or condo you rent by the night is easier: DSCR and investor loans count booking income.
- Where
- Second homes in California, Arizona, Florida and Ohio; investment properties nationwide where permitted.
What makes a condo a condotel.
Lenders don’t go by the name on the building; they look at how it operates. Fannie Mae treats a project as a hotel, and ineligible, when it is managed and operated like one, even though each unit is individually owned. The signs they look for:
- Hotel services
- A front desk or registration, daily cleaning, central key systems, or rentals by the day or week.
- A rental program
- A rental pool, or sharing rental revenue with the building, a resort or a hotel operator.
- Limits on your use
- Rules that restrict when you can stay in your own unit, or that give a manager control over who occupies it.
- Hotel heritage
- A converted hotel, a hotel franchise, or units without full kitchens.
| Condotel | Condo rented on Airbnb | Regular condo | |
|---|---|---|---|
| Who rents it out | The hotel operator’s program | You, or your own manager | You, long term |
| Fannie Mae and Freddie Mac | Not eligible | Depends on the building | Usually eligible |
| Typical financing | Specialist condotel or portfolio loan | DSCR or investor loan | Conventional or FHA |
What condotel lenders typically look for.
Each specialist lender sets its own rules, and the building matters as much as you do.
| Requirement | What’s typical |
|---|---|
| Down payment | Often 20–30% on a purchase (up to about 75% loan-to-value); refinances, especially cash-out, usually leave more equity in. |
| The unit | A full-size kitchen, and for many lenders a minimum size (often a few hundred square feet) or a separate bedroom. Most studio hotel rooms don’t qualify. |
| Use | Second home or investment property. Most programs won’t finance a condotel as your primary residence. |
| Credit and reserves | Strong credit, and reserves that are often a year or more of housing costs. |
| The building | Its budget, reserves, any litigation, and how many units one owner controls are reviewed, often through a condo questionnaire. |
| Income | Full documentation, bank statements, assets, or the unit’s rental income, depending on the program. |
Know the building already?
Send me the building or resort name. I’ll check which of my lenders will finance it before you spend money on an offer.
Ways to qualify.
Rental income (DSCR)
Qualify on what the unit earns: its rental program history or a projection, against the payment and dues.
Best forInvestors with write-offs or several properties
Your income
A portfolio or condotel program that verifies your pay, returns or other income.
Best forSecond-home buyers with straightforward income
Bank statements
Twelve or twenty-four months of deposits instead of tax returns.
Best forSelf-employed buyers
Assets
Qualify on savings and investments rather than income.
Best forRetirees and buyers with large assets
Buying from abroad? Foreign national loans also cover condotels in many resort markets.
Short-term rentals outside condotels.
A house or an ordinary condo that you rent by the night is easier to finance than a condotel, as long as you finance it the right way.
- Investor or DSCR loan
- The usual fit. Lenders count booking history, an appraiser’s estimate or market data such as AirDNA, often discounted. See DSCR loans.
- Second-home loan
- Fannie Mae requires a second home to be yours to occupy and control. It can’t be under a management company’s control, and its rental income can’t help you qualify, so it rarely suits a full-time nightly rental.
- Local rules
- City licenses, permits, zoning and HOA rules can limit or ban nightly rentals. Check them before you buy.
The trade-offs to weigh.
- Fewer lenders, higher costs. A larger down payment and usually a higher rate than a conventional condo loan.
- The operator’s share. Rental programs keep part of the revenue and may set the rules on cleaning, furnishing and your own stays. Read the rental agreement before you buy.
- Seasonal, uneven income. Resort income can swing month to month, so budget on the slow months.
- Harder to resell. The same financing limits apply to your future buyer, which can narrow the market.
- Building risk. HOA dues, special assessments and the building’s finances matter more than in an ordinary condo.
How we get started.
Send me the building
The building or resort name, the price, how you’ll use the unit, and any rental history.
I check the building
Which of my lenders will finance that project, and on what terms, before you commit.
Apply and review
The lender reviews you, the unit and the building, usually through a condo questionnaire and the appraisal.
Close
In your name or your company’s, as a second home or an investment.
Condotel and short-term rental loans, answered plainly.
How do you finance a condotel?
Through a specialist lender that keeps the loan on its own books, because Fannie Mae and Freddie Mac won’t buy loans on hotel-run buildings. Expect a larger down payment and a review of the building as well as of you.
How do you get a loan for a short-term rental?
Usually with a DSCR or investor loan that counts the property’s booking income. A second-home loan rarely fits a full-time nightly rental. See short-term rentals.
What makes a property a condotel?
How it operates: a front desk, short stays, daily cleaning, a rental pool or revenue sharing, or rules limiting your own use. See what makes a condo a condotel. See also: Short-term rental DSCR calculator.
Is a condotel a good investment?
It depends on the building, the rental program’s terms and the market. Owners get resort amenities and income when they’re away, but face fees, seasonal income and a smaller pool of buyers. I’ll show you the financing side so you can weigh it. See also: Short-term rental DSCR calculator.
Can I live in a condotel full-time?
Usually not with condotel financing, which is for second homes and investments, and many buildings limit owner stays. Check the building’s rules.
Can rental income help me qualify?
With some programs, yes: the unit’s rental history or a projection can be used. Others qualify you on income or assets instead.
What is the 7-day rule for short-term rentals?
A tax rule: when guests stay seven days or less on average, the income can be treated differently from ordinary rental income. It affects your taxes, not your loan; ask a CPA.
How do I get a loan to buy a hotel?
A whole hotel is a commercial property, financed with a commercial bank, SBA or commercial real estate loan based on the hotel’s operating income and your experience running one. I finance individual condotel units and short-term rentals, and can point you to a commercial lender for a whole hotel.
DSCR & investor
Hard-to-finance condos
Foreign national & ITIN
Cash-out refinance