Maui Condo Vs Condotel

Here’s how much you should put down when buying a vacation home.

How much money should you expect to put down when buying a vacation home or maui condo?

What is a Maui Condotel?

That’s a problem a lot of buyers and lenders face in this market because different kinds of condominiums are considered ‘condotels.’ A condotel is a condominium that’s operated as a hotel. There’s a front desk, you can walk in and rent a room for the day, it’s managed like a resort, etc. Thus, lenders want buyers to put down 30% to 35% for condotels.

Maui Condo

If the property is just a condo (even though it might allow vacation rentals), you may be able to put down 20% to 25%. You can also get a lower down payment if the condo is a second home, but you need to be clear with your loan officer about your plan. If you’re buying the property as a 1031 tax exchange, it’s obviously an investment, so you can call it a second home and get a lower down payment.

Which is best for you?

Maui Condo or Condotel?

At the end of the day, what’s important for you to do is reach out to me and tell me what you’re thinking about doing so I can connect you with the right lender who’ll give you a great loan for the right down payment. I can also connect you with a 1031 specialist. The goal is to get you the best property for the least money down, if that’s your plan. Some people prefer to put a bunch of money down, and that’s fine, but if you’re working with a limited amount of capital to make your investment, you need to consider how much you’re putting down. If it’s 20% instead of, say, 35%, that’ll change your purchase price.

 

I’d be happy to walk you through the advantages and disadvantages of buying a condo versus buying a condotel.


When you talk to a lender, if you’re looking at buying a condotel, make that abundantly clear to them. I’m not trying to be mean, but mainland lenders often screw up this type of transaction because they don’t know the difference between condos and condotels. Part of the problem is that Fannie Mae and Freddie Mac are either unwilling to take on condotel loans or want a much bigger deposit. It all boils down to risk: Banks are in the business of giving out money, and getting money back. They’re concerned that condotels are properties that buyers are more apt to abandon. Therefore, the lower the down payment, the higher the risk for them.

For more info on Maui Condos

So again, give me a call and I’d be happy to walk you through the advantages and disadvantages of buying a Maui condo versus buying a condotel. Both of them have short-term rental opportunities. Right now, loans are as low as they’ve ever been, so it’s a great time to invest in real estate. The market is very active. Getting pre-qualified, as well as knowing what you need to do will help. Preparing yourself to step into the buying role is very helpful when it comes time to negotiate your purchase.

As always, if you have any other real estate questions, feel free to reach out to me as well. I’d love to be your Maui real estate resource. Aloha and have an amazing day!

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