DSCR Direct

Condotels - also called condo-hotels - are individually owned condo units within a hotel-branded or hotel-operated building. Owners can use the unit personally for a limited number of days per year, and the rest of the time it sits in the hotel rental pool generating income. These properties have become increasingly popular with investors looking for hands-off short-term rental income in resort and tourist markets.

How Condotels Differ from Traditional Condos

A traditional condo is a residential unit in a multi-unit building, typically with a homeowners association. A condotel operates as part of a hotel, with front desk services, daily housekeeping, and a central reservation system. Condotel units are usually fully furnished and managed by the hotel operator, which means you do not need to find tenants or manage the property yourself. The key distinction for lenders is that condotels rely on short-term rental income rather than long-term lease income, which changes how the DSCR is calculated.

Why Condotels Are Harder to Finance

Most conventional lenders will not finance condotels because Fannie Mae and Freddie Mac do not purchase condotel loans. The hotel-style operation, short-term rental income, and seasonal occupancy make them a non-conforming property type. This is exactly where DSCR loans fill the gap - non-QM lenders specialize in property types that fall outside agency guidelines, and condotel programs are readily available.

How Short-Term Rental Income Is Calculated

For condotel DSCR calculations, lenders typically look at the trailing 12 months of rental income from the hotel management company. Some lenders will also accept projections from STR data providers like AirDNA. The income is averaged over 12 months to account for seasonal fluctuations, and the resulting monthly figure is used as the numerator in the DSCR ratio. Lenders generally apply a vacancy factor and may haircut the income by 10-25% to be conservative.

DSCR Loan Requirements for Condotels

Condotel DSCR loans typically require a minimum 600 FICO score, with best rates at 740 and above. LTV maximums are often slightly lower than standard investment properties - expect 70-75% LTV rather than 85%. Reserves requirements may be higher, often 9-12 months of PITIA. The property must be in a recognized condotel project, and the hotel management agreement will be reviewed as part of underwriting.

What to Look for in a Condotel Investment

Location is critical for condotel performance. Properties in high-demand tourist destinations like Miami Beach, Maui, or Orlando tend to produce the strongest and most consistent rental income. Review the hotel operator agreement carefully - understand the revenue split, management fees, reserve fund contributions, and any blackout dates on personal use. A well-managed condotel with strong occupancy can produce excellent cash flow with minimal investor involvement.

Condotel vs. Short-Term Rental Condo

Some investors consider buying a regular condo and listing it on Airbnb instead of purchasing a condotel. Both strategies can work, but they have different risk profiles. A condotel gives you built-in hotel management, branding, and a reservation system, but you share revenue with the operator. A self-managed STR condo gives you more control and potentially higher returns, but requires more hands-on involvement and may face local STR regulations. DSCR loans are available for both strategies.

Get Financed Today

Condotel financing is available through DSCR Direct from hundreds of competing lenders. Enter your scenario at dscrdirect.net to see your rate instantly, or reach out to info@dscrdirect.net for help structuring a condotel deal. We finance condotels in all 50 states.