Thoughts on non traditional lenders for unwarranted condos

[Dev Paul]

Hope everyone is looking forward to the long independence day weekend! While discussing my options on another thread, i was introduced to the idea of some non-traditional lending which i had no idea about earlier. To give a context- im primarily interested in a beach front condo in destin, PCB, Miramar beach area. Since i already have an existing mortgage on my primary home which kind of maxes my mortgage based on my income, i was hoping to buy investment property with 20% downpayment. But my traditional lender told me that with some new rules coming in effect early this year, they wont be able to finance condotels or in other words most investment condo properties in this area. Some of the nicer folks here put me in touch with non-traditional lending options where rate of interest is 4.5 - 5.5% compared to in early 3's if i go with traditional loan mortgage. 

So my question to all you wise folks here is, is it worth it to pay much higher rate of interest or its better to invest my money in townhomes or SFH where i can still get traditional mortgage? Ofcourse in the latter case, i have to most likely start looking at other locations as my sub 500 budget wont give me much options in terms of non condo- homes in the destin/pcb area.

[Joe C.]

Just in case you were not aware, condotels and condos are not the same thing. A condo building is just a multi-family building with an HOA in charge of the common features. The HOA controls how the building is used and may even prevent STRs entirely, but usually if they allow STRs it is completely up to you how to manage them, including if you want to do it yourself and who you hire to clean them.

A condotel is a multifamily building where the HOA is basically a management company and they run the building like a hotel. You are usually limited to only using it personally for a few weeks, and you MUST use their management company for rentals, their cleaning company for cleaning, etc. They decide what to charge for those services and you cannot shop around. It's entirely different from a simple condo.

Lenders (and most investors!) HATE condotels. Condos have some issues but nothing close to condotels. They are completely different.