Condotel Financing in Myrtle Beach: What Buyers Should Know

Thinking about buying a condotel in Myrtle Beach but unsure how the financing works? You are not alone. Condotels look like condos, yet lenders often treat them differently, which can change your loan options, down payment, and timeline. In this guide, you will learn how condotel loans work, what lenders scrutinize in Horry County, the costs to expect, and the due diligence steps that help you close with confidence. Let’s dive in.

What is a condotel?

A condotel is a condo unit inside a property that operates like a hotel. You own the unit, and when you are not there, a manager often places it in a short-term rental program with front-desk services and shared amenities. Because of this hotel-style operation and rental activity, many lenders classify condotels as non-warrantable projects.

Why financing is different

Standard mortgage programs, including many Fannie Mae and Freddie Mac loans, have strict condo project rules. High short-term rental activity, centralized rental desks, and heavy investor ownership often push condotels outside those rules. Lenders see higher risk due to seasonal demand, reliance on a manager, and appraisal complexity, so you should expect tighter terms and more documentation.

Loan options in Myrtle Beach

You have several potential paths. Each comes with different requirements and costs.

Conventional conforming loans

Some conforming lenders only finance projects that meet their condo eligibility guidelines. Rental programs, single-owner concentration, and large commercial components can make a project non-warrantable. If a project qualifies, you may still need a larger down payment and stronger credit.

FHA and VA loans

FHA and VA loans generally require the condo project to be approved under their programs. Many condotels are not on those lists due to rental structure and commercial components. Always verify a project’s approval status before you budget around these programs.

Portfolio and non-conforming loans

Certain banks and specialty lenders offer portfolio loans that stay on the lender’s books. These can be more flexible about condotel features but usually come with higher rates and larger down payments. Some will review documented rental agreements and historical income as part of underwriting.

Commercial or business-purpose loans

If you plan to use the unit mainly as an income-producing property, a lender may treat it like a commercial loan. That can mean higher rates, shorter terms, and possibly interest-only periods. Underwriting will focus on the asset’s income and expenses.

Bridge or hard-money loans

Short-term financing can help you move quickly when conventional options are not available. These loans are usually expensive and used as a temporary solution until you refinance.

Cash purchases

Due to complexity, many buyers in Myrtle Beach pay cash or use private financing. This can speed up closing and remove lender hurdles, but you should still complete thorough due diligence.

What lenders scrutinize

Understanding lender hot buttons helps you prepare and avoid delays.

Project warrantability

Lenders review the building’s status and rental program. A high share of short-term rentals or operator control can lead to non-warrantable status. Caps on commercial space, owner concentration, and use restrictions also matter.

HOA financial health and insurance

Expect a deep review of the association budget, reserves, and insurance coverage. Low reserves and inadequate insurance are major red flags. Lenders want to see a stable operating budget and proper master policies in place.

Litigation and appraisal

Pending litigation that threatens the project’s finances can derail financing. Appraisals can be tricky if comparable sales are limited, and some appraisers may use an income approach. Choose an appraiser who understands condotels in Myrtle Beach.

Costs, rates, and down payments

Condotel financing is usually more expensive than a standard condo loan. Plan for a larger down payment, often in the 20 to 30 percent range depending on the lender and project. Interest rates also tend to be higher, and some programs may add fees or require extra reserves.

Using rental income to qualify

Many lenders will not count projected rental income for a new purchase. When rental income is allowed, lenders commonly require one to two years of documented history. They also tend to apply vacancy and expense factors, and they may use net income after management fees, HOA dues, and utilities rather than gross revenue.

Local rules, taxes, and insurance

Myrtle Beach and Horry County have specific requirements you should confirm early.

• Lodging and accommodations taxes: Short-term rentals typically require you to collect and remit local occupancy or accommodations taxes. Confirm current rates and filing procedures with the city and county.
• Business licensing and registration: Short-term rental operations often require a business license or registration. Verify what applies to your building and unit.
• Zoning and HOA rules: Make sure both local zoning and the association allow short-term rentals, and review any rental restrictions or minimum owner-occupancy requirements.
• Coastal insurance exposure: Properties near the coast face hurricane, wind, and flood risks. Check the flood zone and flood insurance requirements. Review what the HOA master policy covers and what you need to add, such as a policy with a vacation rental endorsement or commercial liability.

Know the rental program

Many condotels have a mandatory or centralized rental program. Read the management agreement closely so you understand revenue splits, fee schedules, owner-use windows, booking priority, cancellation policies, and payment timing for disbursements. Rules on upgrades, linens, and maintenance can also affect your net income and owner experience.

Due diligence checklist

Gather these items before you go under contract or during the early contingency period.

• Condo association documents: Declaration, bylaws, and rules and regulations.
• Financials: Current budget, balance sheet, reserve study, and the most recent year-end financials.
• Meeting minutes: Recent board minutes, which can reveal pending assessments or legal issues.
• Insurance: Master policy declaration pages and proof of adequate coverage.
• Litigation: Any current or recent litigation involving the HOA or developer.
• Rental program: Management agreements, fee structure, owner-use rules, booking priority, and cancellation policies.
• Occupancy data: Percentage of owner-occupied versus investor-owned units.
• Unit history: Seller’s documented rental history if available, plus any maintenance records.
• Local compliance: Proof of local business license and short-term rental registration if required, and clarity on who collects and remits lodging taxes.
• Flood and hazard exposure: Flood zone determination and related insurance needs.
• Appraisal: An appraiser experienced with condotels who can use an income approach if comparable sales are limited.
• Financing prep: A lender or mortgage broker familiar with Myrtle Beach condotels, credit documentation, reserves or liquidity statements, and prior tax returns with rental schedules if you plan to use income to qualify.

Smart offer and closing strategy

• Ask for the full condo and rental program packet before you make an offer. You want time to review everything, not just the highlights.
• Write your contract with financing and document review contingencies that match the complexity of condotel deals. Build in time for a specialized appraisal and HOA review.
• Order insurance quotes early. Align your coverage with the HOA master policy and flood requirements.
• Coordinate with your lender on the appraisal scope. Provide rental history, HOA financials, and management agreements to support valuation.

Myrtle Beach market context

Myrtle Beach is a year-round destination with clear seasonal peaks, especially in summer. That means occupancy, nightly rates, and cash flow can vary by month. A strong on-site manager can streamline bookings and maintenance, yet management fees and program rules affect net income. Budget for seasonality and compare buildings on both revenue potential and cost structure.

Work with local pros

You want a team that understands both the local rules and the realities of condotel underwriting. An experienced agent can help you source the right building, collect the full document set, and coordinate with lenders who work these loans often. A local lender or broker who knows Myrtle Beach condotels can save you time, surprises, and rework.

Ready to explore condotels?

If a condotel fits your plans for a vacation spot and rental income, a clear financing plan and strong due diligence will set you up for success. We help you compare buildings, request the right documents, and coordinate with lenders that know the Grand Strand market. When you are ready, reach out to Unknown Company to Start Your Coastal Home Search.

FAQs

Can I use an FHA or VA loan for a Myrtle Beach condotel?

• Possibly, but only if the condo project is approved under FHA or VA guidelines, and many condotels are not. Always verify approval before relying on these programs.

Will lenders count rental income to qualify for a condotel loan?

• Lenders may accept one to two years of documented rental income, then apply vacancy and expense adjustments. Projected income is rarely counted without history.

What down payment should I expect on a condotel?

• Many buyers need 20 to 30 percent down, and some specialty lenders may require more depending on the project and your profile.

Are condotel loans more expensive than regular condo loans?

• Yes. You should expect higher interest rates, larger down payments, and tighter underwriting compared to standard condo financing.

What insurance will I need for a Myrtle Beach condotel?

• The HOA’s master policy may not cover your interior or liability exposure. Plan for a policy that fits short-term rentals, plus flood insurance if required by the property’s flood zone.