[DSCR](/blog/what-is-dscr-ratio) Loans for Condotels: How to Finance Condo-Hotel Investments

Condotels—individually owned condominium units within a hotel-branded property—offer investors a unique hybrid: the appreciation potential of real estate ownership combined with the revenue infrastructure of a hotel operation. Think branded properties like Marriott Residence Inn, Hilton Grand Vacations, or boutique hotel-condo developments in resort destinations.

But financing condotels has always been tricky. Most conventional lenders won't touch them, and FHA/VA loans explicitly exclude condotel properties. This is where [[DSCR loans](/blog/best-dscr-lenders-2026)](/blog/dscr-loan-guide) fill a critical gap, offering investors a path to financing these income-producing properties based on their revenue potential rather than the borrower's personal income.

What Exactly Is a Condotel?

A condotel (also spelled condo-hotel or condominium hotel) is a condominium project that operates as a hotel. Key characteristics include:

• Individual unit ownership: You own your specific unit with a deed
• Hotel management: A professional hotel operator manages the property and handles bookings
• Revenue sharing: When your unit is rented to hotel guests, you receive a share of the revenue (typically 50-60%)
• Personal use allowed: Most condotels allow owners to use their units for a limited number of days per year
• Hotel amenities: Units come with hotel services like front desk, housekeeping, room service, pools, and restaurants
• Rental pool participation: Units are typically placed into a rental pool managed by the hotel operator

Condotel vs. Traditional Condo

Why DSCR Loans Work for Condotels

The Financing Challenge

Condotels are notoriously difficult to finance because:

• Fannie Mae and Freddie Mac don't purchase condotel mortgages
• FHA and VA explicitly exclude condotels
• Most conventional lenders consider them too risky due to income volatility
• Hotel-style operations don't fit standard residential underwriting models

The DSCR Advantage

DSCR loans solve these problems by:

• Evaluating the unit's income rather than fitting it into conventional categories
• Accepting [short-term rental income](/blog/airbnb-hosting-guide-beginners) as the primary revenue source
• Not requiring personal income verification from the borrower
• Offering investor-focused terms designed for income-producing properties
• Closing faster than commercial hotel loans

Income Calculation

For condotels, DSCR lenders typically evaluate income using:

Gross Revenue: Average daily rate × occupancy rate × 365 days Owner's Share: Gross revenue × owner's percentage (usually 50-60%) [Net Operating Income](/blog/net-operating-income-guide): Owner's share minus HOA fees, insurance, taxes, and reserves DSCR: NOI ÷ Annual mortgage payments

Example:

• Average daily rate: $200
• Occupancy: 65%
• Annual gross revenue: $200 × 0.65 × 365 = $47,450
• Owner's share (55%): $26,098
• Annual expenses (HOA, taxes, insurance): $12,000
• NOI: $14,098
• Annual debt service: $10,800 ($900/month mortgage)
• DSCR: 1.31 ✓

Qualification Requirements

Property Requirements

• Established condotel project with operating history (most lenders avoid pre-construction)
• Professional hotel management in place
• Documented rental income history for the unit or comparable units in the project
• Acceptable project concentration (lender may limit exposure to a single project)
• No litigation against the condotel association or developer

Borrower Requirements

• Credit score: 680+ (some lenders require 700+)
• Down payment: 25-35% (condotels require higher down payments than standard investment properties)
• Reserves: 6-12 months of mortgage payments
• Entity ownership: LLC recommended but not always required
• No income documentation required (the DSCR advantage)

Loan Parameters

• Loan amounts: $100,000 to $2,000,000+
• Interest rates: Typically 1-2% above standard DSCR rates
• LTV: 65-75% maximum
• Amortization: 30 years
• Term: 5-year or 7-year adjustable, some 30-year fixed available
• [Prepayment penalty](/blog/dscr-loan-prepayment-penalty): 3-5 year declining penalty common

Evaluating a Condotel Investment

Revenue Analysis

Before purchasing, obtain:

• 3 years of rental income history for the specific unit (or comparable units)
• Occupancy data for the project and the local market
• Average daily rate trends over time
• Revenue sharing agreement details (owner's percentage, expense allocations)
• Management fee structure (base fee + incentive fees)

Expense Analysis

Condotel expenses can be substantial:

• HOA/condo fees: Often $500-$1,500+/month (covers hotel operations, amenities, common area maintenance)
• Property taxes: Assessed as commercial/hospitality in some jurisdictions
• Insurance: Higher premiums than standard condos
• FF&E reserve: Furniture, fixtures, and equipment replacement fund (often 3-5% of revenue)
• Personal use opportunity cost: Days you use the unit = days without rental income

Due Diligence Checklist

• Review the management agreement thoroughly
• Analyze actual rental income history (not just projections)
• Check the condotel association's financial health and reserves
• Verify the hotel operator's reputation and contract terms
• Understand [renovation](/blog/bathroom-renovation-cost-guide)/refurbishment requirements and timelines
• Research the local tourism market and competitive landscape
• Confirm your ability to change management companies if needed
• Review any restrictions on personal use

Where to Buy Condotels

Top Condotel Markets

Condotels concentrate in leisure and resort destinations:

• South Florida: Miami Beach, Fort Lauderdale, Key West
• Hawaii: Waikiki, Maui, Big Island
• Las Vegas: Strip-adjacent properties
• Orlando: Near theme parks and convention center
• New York City: Manhattan boutique hotel-condos
• Ski resorts: Aspen, Park City, Vail
• Beach destinations: Myrtle Beach, Gulf Shores, San Diego

What Makes a Good Condotel Market?

• Year-round tourism demand (not just seasonal)
• Limited hotel supply relative to demand
• Strong average daily rates ($150+)
• Consistent occupancy (60%+ annually)
• Growing tourism infrastructure
• Favorable local regulations for short-term rentals

Pros and Cons of Condotel DSCR Investments

Advantages

• Passive income: Hotel management handles everything
• Brand power: Recognized hotel brands drive bookings
• Amenities included: No need to provide or maintain amenities yourself
• Diversified bookings: Hotel's marketing and distribution channels
• Personal use: Enjoy your unit for vacations
• Appreciation potential: Premium locations tend to appreciate well
• No landlord headaches: Professional management handles all guest interactions

Disadvantages

• Lower net yields: Revenue sharing and high HOA fees reduce returns
• Limited control: Hotel management makes operational decisions
• Financing difficulty: Higher rates and down payments than standard properties
• Income volatility: Dependent on tourism trends and economic conditions
• HOA increases: Rising costs can erode profitability
• Renovation mandates: Hotel brands may require periodic unit upgrades at owner's expense
• Market concentration risk: Your investment is tied to one destination's tourism health

Alternatives to Consider

Before committing to a condotel DSCR loan, compare these alternatives:

• Standard condo with short-term rental: More control, but you handle management
• Vacation home DSCR loan: Buy a standalone property in a resort area
• Furnished rental DSCR loan: Urban furnished apartments targeting corporate travelers (see our guide on furnished rental DSCR loans)

Making the Numbers Work

Maximizing Revenue

• Choose units with the best views, locations, or features within the project
• Understand peak and off-peak seasons for your market
• Negotiate the best possible revenue sharing percentage
• Minimize personal use days during peak season
• Consider upgrading furnishings to command premium rates

Minimizing Costs

• Review HOA budgets carefully before purchasing
• Understand what's included in HOA fees vs. additional charges
• Plan for FF&E reserve contributions
• Budget for periodic renovation requirements
• Consider tax benefits including depreciation and expense deductions

Getting Started with Condotel DSCR Financing

1. Learn DSCR fundamentals: Start with our [comprehensive [DSCR loan guide](/blog/dscr-loan-for-beginners)](/blog/dscr-loan-guide)
2. Research markets: Identify condotel markets with strong, year-round demand
3. Analyze specific projects: Focus on established properties with proven income history
4. Run the numbers: Calculate realistic DSCR using actual revenue data, not marketing projections
5. Find a specialized lender: Work with DSCR lenders who specifically finance condotels
6. Engage a local agent: Use a real estate agent experienced in condotel transactions

Condotels aren't for every investor, but for those seeking truly passive income in premium hospitality locations, they offer a compelling proposition—especially when financed with a DSCR loan that evaluates the investment on its income merits rather than your personal financial profile.

Related Articles

• Fastest-Closing DSCR Lenders in 2026
• [Best DSCR Lenders for Airbnb and Short-Term Rental Properties in 2026](/blog/dscr-lenders-for-airbnb)
• Best DSCR Lenders for First-Time Investors
• Best DSCR Lenders for Foreign National Investors in 2026
• Best DSCR Lenders That Allow LLC Ownership