Thinking about buying a short-term rental or condotel unit in Downtown Miami but unsure how to finance it? You are not alone. Many buyers are attracted to the income potential and hotel-style amenities, yet lenders see these buildings differently than standard condos. In this guide, you will learn how lenders classify these projects, which loan options are realistic, what terms to expect, and how to prepare a clean file that can close. Let’s dive in.
What qualifies as a condotel or STR unit
Short-term rental friendly buildings fall into a few buckets in Downtown Miami:
- Condotel or condo-hotel: A condo building run like a hotel with front desk, housekeeping, and often a central rental program.
- Branded residences: Luxury condos affiliated with a hotel brand. Some offer optional or mandatory rental programs.
- STR-friendly condos: Conventional condos that allow short-term rentals under condo documents. These are less common.
The key theme is hotel-like operations. If a building looks and runs like a hotel, lenders often treat it as something other than a standard residential condo.
Why financing is different
Hotel-style services, rental pools, and project-level controls shift underwriting from a unit-only view to a broader project analysis. Lenders focus on association budgets, the percentage of units in rental programs, owner-use rights, and whether daily operations resemble a hotel. In Downtown Miami, strong tourism and STR demand create revenue opportunities, but also add regulatory and underwriting complexity. Lenders will want proof that rental activity complies with local law and with the building’s governing documents.
How agencies view condotel projects
Fannie Mae and Freddie Mac
Both agencies generally classify hotel-like or condotel projects as ineligible for standard condo approval. If a project markets hotel services, has a mandatory rental pool, or operates like a hotel, it will likely be considered non-warrantable. That removes access to the lowest-cost conforming loans and pushes you toward non-agency or portfolio products.
FHA and VA
FHA and VA require condo project approval and typically exclude hotel or motel projects. If a building operates as a condotel, FHA- or VA-insured financing is usually not available. Mixed-use settings are possible only when the residential character clearly dominates and hotel features are minimal.
Portfolio and specialty lenders
When agency, FHA, and VA options are off the table, portfolio banks, credit unions, and specialty lenders step in. Some will treat a single unit as a residential loan with stricter terms. Others underwrite it more like a commercial or hotel asset, especially when a rental pool or hotel brand drives operations.
Financing options and typical terms
Terms vary by lender and borrower profile, but the ranges below help with planning.
Agency loan, if the project qualifies
- When possible: Only if the building meets condo project eligibility and does not operate like a hotel.
- What to expect: The lowest rates among options, standard 15 to 30-year amortization, and lower down payments for owner-occupied purchases. In practice, condos often require 10 to 20 percent down.
- Watchouts: Any sign of a rental pool or hotel-style services can trigger ineligibility.
Portfolio non-agency programs
- Who offers them: Local banks, credit unions, and regional lenders with non-warrantable condo programs.
- What to expect: Rates typically 0.5 to 2 percent higher than conforming, with down payments in the 15 to 25 percent range for primary use and 20 to 30 percent for second homes or investors. Expect stricter reserves and credit overlays.
- Underwriting focus: Loan-to-value limits, HOA budget strength and delinquencies, rental policies, and how rental income is treated.
Commercial and DSCR-style loans
- Use case: Projects that are clearly hotel-like or when you are buying multiple units.
- What to expect: DSCR underwriting, shorter 5 to 10-year terms, interest-only options and balloons are common. LTV often 65 to 75 percent. Rates sit above comparable residential financing and personal guarantees may be required.
Bridge and private money
- Use case: Speed or complexity prevents conventional or portfolio approval.
- What to expect: Short 6 to 36-month terms, higher rates, and lower LTVs near 60 to 70 percent. These loans are a tool when you need time to refinance or stabilize income before moving to permanent debt.
Lender underwriting hot buttons
Lenders go beyond the unit and examine the entire project. Expect questions around:
- Hotel-like characteristics: Daily housekeeping, front desk, central reservations, and a mandatory rental pool.
- Condo documents: Rental restrictions, owner-use night limits, revenue-sharing rules, termination rights, and any litigation.
- Rental program mechanics: Optional or mandatory, revenue split, management fees, payment schedule, and proof of historical performance.
- Local compliance: Evidence of city and county registration, proper licensing, and tax collection for transient rentals.
- Operating data: Occupancy, ADR, and RevPAR history. Lenders typically discount projections.
- HOA finances: Budget health, reserves, special assessments, and delinquency rates.
Downtown Miami specifics to know
Local rules and taxes
City of Miami and Miami-Dade County maintain rules for short-term rentals that can include registration, business taxes, and transient occupancy tax collection. Even if a municipality permits STRs, the condo association may restrict or prohibit them. Lenders will expect proof that your intended rental use is legal under both the local code and the condo documents.
Insurance and risk
Buildings operating as hotels may carry commercial insurance rather than standard condo coverage. Your lender will ask for evidence of adequate hazard and liability coverage and may require specific endorsements and lender loss payable clauses.
Spotting operator-run rental programs
In Downtown Miami, many branded or hotel-affiliated buildings offer centralized rental programs. To identify them, review:
- The offering plan and condo declaration for rental program or hotel operator agreements.
- Any master lease, franchise, or management agreement that outlines revenue sharing and owner-use rights.
- HOA financials and minutes for how rental income is booked and distributed.
- Marketing language that flags “condo-hotel,” “short-term rentals allowed,” or “hotel management on site.”
Common rental program models
Operator-run programs usually fall into one of these structures:
- Mandatory rental pool: Owners must participate. Income is pooled and split by formula, with owner-use nights defined. This often leads lenders to treat the project as hotel-like.
- Optional enrollment: Owners may join a central program or rent independently within condo rules. Lenders still review how many units participate and how the program operates.
- Hotel-affiliated branded residence: A hotel brand manages rentals for enrolled units, sometimes with specific standards and fees that affect net income and underwriting.
Your lender question checklist
Ask these before you go under contract, and document the answers in writing:
- Is this project eligible for your conventional programs, or will it require a portfolio or commercial product?
- What project features would make it hotel-like in your view, and why?
- If non-agency, what are the expected rate, points, and minimum down payment for my use case?
- How do you treat income from a building-wide rental program? What portion will you accept and what proof is required?
- Can rental pool distributions count toward my income or DSCR? How are they averaged or discounted?
- What are your LTV and DSCR limits? Do you offer interest-only options?
- How many months of reserves are required for me and for the HOA?
- Do you allow mandatory rental pools or only optional programs?
- What thresholds apply for HOA delinquencies, litigation, or investor concentration?
- What insurance policies and endorsements do you require for this building type?
- How will title be handled if a master lease or rental pool agreement appears on title?
- What documents do you need to confirm local STR legality and tax registration?
- How long does your process take, and can I lock the rate pending condo review?
- Are there prepayment penalties or personal guarantees?
Documents to gather early
Prepare a tight, lender-ready file to speed approvals:
- Condo declaration, bylaws, offering plan, and amendments.
- Rental program agreement, hotel management or master lease, and any franchise agreements.
- HOA budget, current income and expenses, reserve study, and most recent audited financials.
- Board minutes referencing rental program approvals, assessments, or litigation.
- Rental pool reports and owner distribution statements, preferably 12 to 24 months.
- Proof of STR compliance: city and county registrations, business tax receipts, transient tax accounts, and any permits required.
- Insurance certificates that show property and liability coverage and endorsements.
- Unit-specific deed, any current lease, and seller-provided rental history.
Red flags that trigger denials or tougher terms
- Mandatory rental pools with complex revenue splits that make units function like hotel rooms.
- High investor concentration or a large share of units in the rental pool.
- Condo documents that broadly allow short-term rentals with minimal owner-occupancy protections.
- Weak HOA finances, low reserves, or active litigation involving the HOA or developer.
- Local enforcement actions or restrictions on STRs in the building or area.
- Lack of transparent rental pool accounting or absence of audited statements.
Strategy tips for Miami buyers
- Start with project eligibility: Before negotiating price, confirm with a lender whether the building is agency-eligible. If not, compare portfolio and commercial options side by side.
- Model realistic income: Lenders discount projections. Base your underwriting on conservative occupancy and ADR and focus on net after management fees and taxes.
- Plan your capital stack: If down payment needs trend higher, evaluate whether a portfolio loan or a short bridge followed by a refinance is the smoother path.
- Secure the right team: Work with a Miami-based real estate attorney and mortgage broker who know condotel documents and local compliance. Experience can be the difference between a smooth closing and a denied file.
- Time your exit: If you use a bridge or higher-cost product, outline an exit plan to refinance into longer-term financing after stabilization.
Ready to map your financing strategy for a specific building in Downtown Miami or Brickell? Get a tailored plan and a clear underwriting path before you write an offer. Schedule a Consultation with Unknown Company.
FAQs
What is a condotel and why does it matter for loans?
- A condotel is a condo operated like a hotel with services and often a rental pool. Many lenders treat these projects as non-warrantable, which limits access to standard agency loans.
Can I use FHA or VA to buy a condotel in Miami?
- FHA and VA usually exclude hotel or motel projects from condo approval, so these programs are typically not available for true condotel units.
What down payment should I expect for an STR-friendly unit?
- For non-warrantable but residential condos, plan for 15 to 35 percent depending on occupancy and lender. True condotels often require 30 percent or more.
Will lenders count rental pool income to qualify me?
- Some lenders accept a portion of documented rental pool distributions, but they often discount the income and require strong historical statements.
How do I confirm a Miami unit is legal for STRs?
- Verify both the condo documents and local rules. You need association authorization plus city and county registration and tax compliance for transient rentals.
Are bridge loans common for condotel purchases?
- Yes. Buyers use bridge or private money when they need speed, when the project is highly hotel-like, or while assembling documents to qualify for longer-term financing later.
