Definition and operation
A condotel has the legal structure of a condominium (declaration of co-ownership, HOA, master policy) plus a hotel operational layer. Typical features:
- 24/7 reception.
- Hotel housekeeping (often mandatory).
- Restaurant, bar, pool, spa.
- Integrated rental program: your unit is rented as a hotel room when you're not there.
- Restrictions on your own occupancy (often ≤ 180 days/year).
Particular financing
Fannie Mae and Freddie Mac (which buy most US residential mortgages) exclude condotels from their guidelines. Consequences:
- No conventional loan at market rate.
- No FHA/VA.
- Specialized portfolio loan lenders with terms:
- 30–35 % minimum down.
- Rate 1–2 % above standard market.
- 12-month reserves.
- For Canadians: the list of foreign national lenders accepting condotel is even shorter. Often cash buyer or Canadian HELOC required.
Tax consequences
US side
If unit rented > 14 days/year and you occupy < 14 days (or 10 % of rental time), it's considered rental property:
- Rental income taxed on Form 1040-NR or 1120-F by structure.
- Deductions: interest, MACRS 27.5-year depreciation, owner fees.
- Passive activity rules: losses can only offset passive income.
If occupancy > 14 days and > 10 % rental time: qualified as residence with partial rental use, limited deductions.
CA side
- Rental income taxable in Canada (with foreign tax credit).
- T1135 if asset > C$100K.
- US rental property to CRA = capital cost allowance Class 1, 4 % rate.
The operator's role
The operator (Marriott, Hilton, Ritz-Carlton, or independent brand) manages:
- Renting your unit when you're not there.
- Hotel maintenance.
- Marketing.
- Distribution on Booking, Expedia, etc.
Typical split: 50 % to operator, 50 % to owner. Some contracts take 60 % operator side. Read the rental management agreement carefully.
Real profitability
Optimistic marketing often advertises 8–12 % gross yield. Reality:
- Gross revenue: $30,000–$80,000 USD/year by location.
- Operator share (50 %): −$15,000–$40,000.
- HOA + insurance + taxes: $12,000–$30,000.
- Net before mortgage interest: $0–$10,000.
On $600,000 purchase, real net yield: 0–1.7 %. Condotel is generally not profitable as pure investment — it is if you value personal use without hassle.
View by province
Condotel appeal for Canadians varies by province:
- Quebec, Nova Scotia: little presence in local investment habits. Modest snowbirds prefer pure condo.
- Ontario, British Columbia: more familiar with the concept (present at Whistler, Mont-Tremblant). ON and BC investors more comfortable.
- Alberta: oil-capital investors sometimes targeted by condotel developers for passive yield.
Who it's for
- Snowbird wanting zero management and accepting low but visible yield.
- Cash investor with diversified wealth, viewing condotel as self-funded vacation home.
- Not for: yield-seeking investor, buyer dependent on standard financing, snowbird wanting > 180 day/year stay.
Every figure, rate, threshold, and deadline in this guide is drawn from a verifiable primary source listed at the bottom of the page. The article is updated whenever the underlying rules change, with a fresh review date stamped at the top.
Sources and references
All sources were publicly accessible at the last review date. Figures and rules may change; verify the current version before any decision.
- Florida Statutes Chapter 718 — Condominium Act applies to condotels. flsenate.gov
- Fannie Mae Selling Guide — Condotel exclusion. selling-guide.fanniemae.com
- IRS Publication 527 — Residential Rental Property. irs.gov/p527
- IRC §469 — Passive activity rules.
- CRA T1135 — Foreign Income Verification Statement.
Logical next step
For experienced cash buyer, auction remains riskiest but most discounted path.