What Is a Condotel?

Short answer

A condotel is a condominium unit in a building run partly or fully as a hotel: a front desk, daily or weekly rentals, housekeeping, and usually an optional or mandatory rental program managed by the hotel operator. Fannie Mae, Freddie Mac, FHA and VA do not finance condotels, so buyers use specialized portfolio or non-QM lenders. Miami Beach, Sunny Isles, Brickell and downtown have dozens of condotel towers.

Definition

A condotel (condo-hotel) combines individual unit ownership with hotel operations. Owners may use the unit part of the year and place it in the rental program the rest; the operator keeps a share of the revenue.

Worked example

A $600,000 condotel unit in Sunny Isles. The lender requires 30% down: $180,000, loan $420,000. The operator's statement shows gross rental revenue of $72,000 last year, with the operator keeping 40% ($28,800), leaving the owner $43,200 before HOA, taxes and insurance. If HOA is $1,400 a month ($16,800 a year), taxes $9,000 and insurance $3,000, net before the mortgage is $43,200 - $28,800 = $14,400. That will not cover a $420,000 mortgage, so the lender qualifies the buyer on personal income or assets, not on the unit's revenue. Figures are illustrative.

How lenders treat condotels

• Larger down payment than a standard condo, often 25% to 35% depending on lender and use.
• Qualifying on your personal income, bank statements or assets; most lenders do not count the rental program income, or count only part of it.
• Second home or investment classification; primary residence is rare because of hotel use.
• Full building review: operator agreement, rental program terms, budget, insurance and structural reports.
• Pricing above conventional. Rates vary daily; call for today's pricing.

Before you buy

Read the rental program agreement: revenue split, fees, owner-use limits, and whether you can opt out. Get the last two years of the unit's revenue statements, and the association budget and any special assessments. Then call us at 305-425-1990 so we can match the building with a lender before you write the offer. See condotel loans.

In South Florida

Condotels are a South Florida specialty, popular with foreign buyers who want a Miami Beach pied-a-terre that earns income when they are away. Local issues: HOA dues are high because they include hotel services, insurance for oceanfront towers is expensive, and many condotel buildings are older and face milestone inspection and SIRS work. Some buildings have a mandatory rental program with blackout dates for owner use. A small number of lenders specialize in condotels; a broker who knows them saves weeks.