Buying a condotel in Waikiki or anywhere in Hawaii is a different process than buying a standard condo. Most lenders won’t touch them. Fannie Mae, Freddie Mac, VA, and FHA all consider condotels ineligible collateral — which means conventional financing is off the table entirely.
But that doesn’t mean financing isn’t available. As a mortgage broker with wholesale access to a wide range of portfolio and Non-QM lenders, C2 Hawaii closes condotel transactions regularly. Our team has financed units at properties including Ka La’i Waikiki Beach (LXR Hotels & Resorts), the Ilikai, and other Waikiki buildings. Here’s what you need to understand before you start the process.
What Is a Condotel?
A condotel — short for condominium-hotel — is an individually owned unit within a project that operates with hotel-like amenities: front desk check-in, housekeeping, concierge services, and the ability to rent the unit nightly or weekly through platforms like Airbnb, VRBO, or a hotel management program.
Hawaii has one of the largest condotel markets in the country, concentrated in Waikiki and resort areas on Maui, Kauai, and the Big Island. The combination of high property values and year-round tourism demand makes these units attractive to investors and buyers looking for a second home with income potential.
The financing challenge is straightforward: because condotels are typically not owner-occupied full-time and often participate in rental pools, they don’t meet the occupancy and project requirements for agency lending. That pushes them into portfolio and Non-QM territory — a space where having an experienced broker matters.
Why You Need a Broker for Condotel Financing
This is not a loan you want to take to your bank or a direct lender. Out of the dozens of wholesale lenders on our platform, roughly 11 offer condotel financing in any form. The rest — including several well-known names — explicitly list condotels as ineligible.
As a broker, C2 Hawaii has access to all 11 of those lenders simultaneously. We know which ones have pre-approved specific Hawaii buildings, which ones have the most competitive rates at different LTV tiers, and which ones move fastest. We shop your loan across the entire eligible pool and place it with the lender that makes the most sense for your specific property, credit profile, and occupancy intent — without you having to do any of that legwork yourself.
A direct lender or bank can only offer you what they have. We can offer you everything that’s available in the market.
Core Eligibility Requirements
While specific guidelines vary by lender, most condotel programs require the following:
Unit Requirements
- Minimum 500 sq ft interior (some programs accept 475 sq ft)
- At least 1 separate bedroom
- Full functioning kitchen — refrigerator and stove/oven required; a cooktop alone typically does not qualify
Project Requirements
- Located in a resort or metropolitan area
- Hotel/resort rating from a recognized travel agency, booking site, or search engine
- Projects with “hotel,” “resort,” “motel,” or “lodge” in the name are generally acceptable
- For newer projects: at least 50% of units sold or under contract; all common elements complete; HOA in control
Down Payment / LTV
- Most programs require 25% down on purchase (75% LTV maximum)
- Cash-out refinances typically capped at 65% LTV
- Some programs allow up to 80% LTV depending on credit, loan amount, and lender
Loan Amounts
- Programs generally start at a $150,000 minimum
- Most cap between $1,000,000–$2,500,000
- DSCR investment programs can go up to $3,000,000 on select lenders
Occupancy
- Primary residence, second home, and investment property are all eligible depending on the lender
- Some programs restrict to investment only
- DSCR programs are available for investment properties qualifying on rental income
DSCR Condotel Financing: Qualifying on Rental Income
For investment property buyers, DSCR (Debt Service Coverage Ratio) programs are a powerful option. Instead of qualifying based on your personal income, the loan qualifies on whether the property’s rental income covers the mortgage payment.
Several lenders in our network offer DSCR programs that accept condotels. Lenders typically apply a 10% reduction to gross rental income to account for extraordinary costs — advertising, furnishings, cleaning — before calculating DSCR. If the adjusted rental income covers the payment, you can qualify without documenting personal income at all.
This works well for:
- Self-employed buyers with complex or hard-to-document income
- Investors who own multiple properties and want to keep debt off personal returns
- Buyers whose personal income doesn’t support the payment but the rental numbers do
What Makes Hawaii Condotel Financing Different
Hawaii has a few wrinkles that mainland buyers and first-timers need to understand:
Zoning matters. Parts of Waikiki are zoned as apartment-precinct rather than resort. Units in apartment-precinct buildings may qualify for different treatment by lenders depending on occupancy type — and in some cases, owner-occupants in these buildings can qualify for lower down payment requirements than a standard condotel.
Short-term rental regulations are evolving. Oahu’s short-term rental rules have tightened significantly. Buyers purchasing specifically for Airbnb or VRBO income need to understand current county regulations and whether their specific building and zoning classification permits short-term rentals. This affects both the investment thesis and how lenders view the projected rental income.
Local knowledge at underwriting is critical. A mainland lender unfamiliar with Hawaii property types will create problems. Appraisal comps for Waikiki condotels, project documentation specific to Hawaii buildings, and understanding how local HOAs are structured — these are things that sink deals when the lender doesn’t have Hawaii experience. We work with lenders who do.
Non-warrantable condo vs. true condotel — know the difference. A non-warrantable condo is a standard condo project that fails Fannie/Freddie warrantability tests — often due to investor concentration or HOA reserves. A true condotel has active hotel operations and amenities. Some lenders will do non-warrantable condos but not condotels. Getting this classification wrong wastes time and can blow up a transaction.
Common Questions
Can I use a VA loan for a condotel?
No. VA loans require Fannie/Freddie warrantable condo project approval, which condotels cannot obtain. This applies regardless of your military status or eligibility.
Can I put less than 25% down?
Rarely. Some programs allow higher LTVs but they come with significant pricing adjustments and stricter requirements. Budget for 25–30% down as the working assumption going in.
Do I need reserves?
Most programs require a minimum of 6 months PITI in reserves on the subject property. Some lenders waive this requirement at lower LTVs.
Can a foreign national buy a Hawaii condotel?
Yes. Several lenders in our network offer foreign national programs that include condotel properties. Requirements include larger down payments and additional documentation, but it is financeable.
What credit score do I need?
Most programs require a minimum mid-score of 620–660. Better pricing kicks in at higher score tiers. Some DSCR programs have no stated minimum but price to risk.
What if the building isn’t on an approved list?
Some lenders maintain pre-approved project lists for Hawaii buildings, which speeds up the process. If your building isn’t pre-approved, we submit for project review — it adds time but is often still doable. This is another reason to contact us before you’re under contract.
Get Started Before You Make an Offer
The most important step is reaching out before you’re under contract. Tell us the building name, approximate unit size, your intended occupancy (primary, second home, or investment), and a rough credit score — and we can tell you quickly which programs are available, what the down payment looks like, and whether the building has any known issues.
Condotel deals require more lead time than a standard purchase. Project review, appraisal timelines, and portfolio lender processing all add time. The buyers who get into trouble are the ones who go under contract first and ask questions later.
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