Condotel financing
in Myrtle Beach.

The direct answer

Can you finance a condotel in Myrtle Beach? Yes.

A condotel is a condo building that operates like a hotel: a front desk, nightly bookings, housekeeping, and units marketed to vacationers. A large share of the oceanfront buildings in Myrtle Beach work exactly this way. It is one of the most common property types in this market, and one of the hardest to finance at a normal bank.

Call a franchise lender, a big bank, or most credit unions about a condotel unit and the answer is no. Not because you are a weak borrower. Because the building fails their rules. The loans that do work are DSCR loans, portfolio loans, and other non-agency programs, and they close on the Grand Strand every week.

This page explains what makes a building a condotel or non-warrantable, why most lenders decline them, what the workable loans look like, and how to confirm a building's status before you spend money on an offer and an inspection.

The classification

What makes a condo non-warrantable

Warrantable means a condo project passes Fannie Mae and Freddie Mac project rules, so a lender can sell the loan to them. Non-warrantable means the project fails those rules, the loan cannot be sold, and most retail lenders will not write it. Common reasons a Grand Strand building fails: The warrantability standards themselves live in the Fannie Mae Selling Guide.

• ✓Hotel-style operations. A front desk, nightly and weekly rentals, central booking, or units marketed as lodging. This is the condotel trigger, and it covers much of the oceanfront.
• ✓Active litigation. The HOA is suing or being sued over construction or money. We wrote a full page on buying a condo in litigation.
• ✓Weak reserves or delinquent dues. The budget sets aside too little for repairs, or too many owners are behind on HOA payments.
• ✓Concentration problems. One person or company owns too many units, or too much of the building is commercial space like restaurants and shops.
• ✓Mandatory rental programs. The master deed requires owners to put units in the building's rental pool.

Every condotel is non-warrantable. Not every non-warrantable building is a condotel. Either way, the financing answer is the same: you need a lender that keeps the loan or sells it outside the agencies.

The loans that work

Condotel loan requirements: down payment, rates, and terms

• ✓DSCR loans. The loan qualifies on the unit's rental income instead of your tax returns. This is the workhorse for condotel investors here. Full guide: DSCR loans.
• ✓Portfolio and bank statement loans. Lenders that keep loans on their own books set their own project rules, so a condotel is a judgment call instead of an automatic no.
• ✓20 to 25 percent down. That is the realistic range for most programs. More down usually buys a better rate.
• ✓Rates a step above agency loans. The loan cannot be sold to Fannie or Freddie, so it prices higher. That part is structural and honest.
• ✓No FHA or VA. Those programs require approved condo projects, and condotel buildings do not qualify.

Now the part almost nobody says out loud. Because so few lenders offer condotel loans, some that do treat scarcity as a pricing strategy. They know you have nowhere else to go, so the fees grow. On an investment purchase, inflated fees come straight out of your cash flow before you collect a single night's rent.

BrickWood Mortgage, our affiliated lender, arranges condotel and non-warrantable loans through wholesale lenders that accept these buildings, and charges the same lender fees on a condotel file as on any other loan it originates, an FHA loan included. Rates and terms still depend on the building, the down payment, and the program. The fee side is simply not where you should pay extra.

A real file

A Myrtle Beach condotel purchase, after a year of lender declines

Peter came to us as a referral. He and his real estate agent had both been calling lenders separately, looking for anyone who would finance the condotel unit he wanted to buy. Bank after bank, franchise lender after franchise lender, the answer was the same no, on a property type this market sells thousands of.

BrickWood financed the unit at its standard fees, the same fee structure an FHA borrower pays. Peter closed. His agent noticed. For the past year, both of them have sent every condotel purchase to us, because they know the building will not stop the loan and the fees will not rise because the word condotel appeared in the file.

That is the whole point. Condotel loans are not a premium specialty product. They are normal loans at a lender that does them all the time.

Before you offer

How to check condo warrantability before you offer

The expensive mistake is writing an offer, paying for an inspection, and then learning the building needs a loan your lender does not offer. The order should be reversed. Send us the building name before you offer and we will tell you whether it is warrantable, what loan it takes if not, and what down payment to plan for. Building-by-building operations and fees are mapped in our oceanfront building directory.

This check is part of the same building review we run on every condo purchase: bylaws, budget, reserves, litigation, and rental history. Whether the condo itself makes sense as an investment is its own question, and we wrote about it here: Are Myrtle Beach condos a good investment?

Buying a Myrtle Beach condotel? Start with the loan.

Tell us the building and the price. We will tell you if it finances, at what down payment, and at the same fees as any other loan.

Common questions

Condotel financing FAQ