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Mortgage Financing for Condo Hotels.
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What is a condo hotel?
Financing Condo Hotel Units.
A condo hotel, also known as a hotel-condo or a condotel, is a type of building that combines the features of condominium residential living and hotel amenities. The private residence wing consists of units owned by individuals as their principal residence or vacation homes or owned by real estate investors who rent the units out to long-term tenants or short-term stays. As most condo hotels are located in major city centres, owning a condo hotel for investment purposes can be lucrative, especially as many tourists and travellers prefer short-term rentals to hotels. The hotel component of the building offers guests access to rooms and amenities, such as a pool, fitness room, spa, restaurants and lounges to which residents have access. There’s a lifestyle aspect associated with owning a unit in a condo hotel that isn’t available in a traditional condominium. Like traditional condominiums, unit holders have legal ownership of their unit (as well as a locker and parking spot if purchased) and have access to common elements while paying a monthly fee to the condo corporation.
Can You Mortgage A condo hotel Unit?
Mortgages for Condo Hotels & Strata Units.
Obtaining a mortgage for a condo hotel unit is similar to obtaining a mortgage for a transitional condominium or strata unit, with additional factors to consider. For one, it is a typical rule of thumb that mortgage lenders are less inclined to finance a condo hotel. Perhaps, in a lender’s eyes, condo hotel units are less marketable or desirable to potential buyers than traditional condominiums. Like any mortgage, the borrower must conform to lender guidelines and underwriting requirements, such as satisfactory income, credit and debt service ratios. If the unit isn’t owner-occupied and rented to a tenant, mortgage lenders will assess if the rental income is sufficient to service the proposed mortgage. Some traditional mortgage lenders will not finance condo hotel units – or will, but the borrower cannot qualify for the mortgage. In this case, DV Capital may be able to assist the borrower by providing them with a non-bank private mortgage. The mortgage lender and their lawyer will complete standard due diligence, such as reviewing the status certificate (or strata documents if the property is in British Columbia) to review the financial health of the condo hotel, just like they would with a non-condo-hotel. Lenders will also assess the occupancy rate and revenue of the condo hotel to gauge its overall financial health. Mortgage lenders willing to lend to condo hotels may provide a lower loan to value or charge a pricing premium to offset its perceived risk with condo hotel units.
Considering a Condo Hotel Unit?
Enjoy the Benefits of Condo Hotel Ownership.
If you are interested in purchasing a unit in a condo-hotel to live in and occupy as your principal residence, be aware there’s a smaller lender audience inclined to finance these assets. If you plan to purchase a condo-hotel unit as an investment property, inquire with the condo/strata corporation about the policies surrounding rentals, specifically short-term rentals, or a real estate lawyer to ensure you abide by condo/strata corporation by-laws. In either case, these unique property types can be an incredible opportunity as a principal residence or investment due to the lifestyle and experience condo hotels provide to owners, tenants, guests and the community. Contact us anytime if you are exploring mortgage financing for condo hotels.
What are examples of Condo-Hotels?
The city of Toronto, for example, is home to many condo hotels, including:
- The Bisha Hotel & Residences.
- One King West Hotel & Residence.
- The Shangri-La Toronto.
- The Four Seasons Private Residences.
- The Ritz-Carlton Residences, Toronto.
- The Residences at the St Regis, Toronto.
- 1 Hotel Toronto (Formerly, The Thompson).
The dining, amenities and aura of residing, owning or spending time at these properties are incredible. If you currently own and looking to refinance an existing mortgage, access its equity, or purchase a condo hotel unit, contact DV Capital to explore mortgage options.
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