Can You Finance a Lodge Condo? Condotel Realities

Eyeing a lodge condo in Cle Elum and wondering if you can finance it? You are not alone. Condotels look like condos, yet many lenders treat them like hotels, which changes everything about your loan options. In this guide, you will learn what lenders look for, how local rules affect income and resale, and the financing paths that actually work in Kittitas County. Let’s dive in.

Condotel basics that drive lending

A condotel is a condo inside a building that operates like a hotel or resort. Red flags for lenders include nightly rentals, a front desk or centralized reservations, daily cleaning, rental pools, and limits on owner use. These operational and legal features, not the marketing brochure, drive the decision.

Fannie Mae classifies projects operated or managed like a hotel as ineligible for standard conforming loans. Their rules call out hotel-style services, mandatory rental pooling, and other transient characteristics as disqualifying features. You can review Fannie’s ineligible project criteria in their published guidance for clarity on what triggers the label.

Why financing gets tricky

Conforming loans and condotels

Conforming loans bought by Fannie Mae or Freddie Mac usually are not available on true condotels. Freddie Mac similarly flags hotel-like projects as ineligible or subject to heightened review, which limits access to typical 30-year fixed financing. When a project is tagged as a condo hotel, most lenders will not deliver that loan to the secondary market.

FHA, VA and USDA limits

FHA excludes condo hotels from its condo approval framework, and projects must be primarily residential. VA and USDA also rely on approved-project standards, which typically do not include hotel-style operations. The bottom line is that government-backed programs rarely work for condotels in their hotel form.

Local rules in Cle Elum

STR permits and taxes in the city

Inside Cle Elum city limits, short-term rentals require a City STR permit, a business license, and proof of insurance. The municipal code includes spacing limits in residential zones of 250 feet between STR parcels, annual renewals, and rules for parking, posting information, and tax remittance. Permits may be nontransferable and can expire on sale, which can affect cash flow assumptions and resale.

Rentals in Kittitas County

Outside the city, Kittitas County rules and lodging taxes apply. The county levies transient occupancy taxes and has code sections covering lodging excise taxes. If your lodge condo sits outside Cle Elum, make sure your projections include county tax and compliance requirements.

Suncadia and resort programs

In the Cle Elum area, Suncadia includes lodge rooms and Trailhead-style condos marketed as resort lodging. Units that participate in nightly rental programs or revenue sharing can be classified as condotels for lending. If you are evaluating a property near the resort, confirm whether the HOA or management treats the unit as part of a rental pool.

Financing paths that work

When conforming and government loans do not apply, you still have options. Each path typically comes with higher down payments, stronger reserves, and higher rates.

• Portfolio loans at banks or credit unions. These are custom, bank-held loans with conservative terms, often requiring 20 to 40 percent down and solid reserves.
• Non-QM and specialty programs. Lenders offer programs for non-warrantable condos and condotels, sometimes using DSCR underwriting to qualify on cash flow rather than your income documentation.
• Investor DSCR loans. These focus on the property’s rental income and are common for short-term rental buyers.
• Commercial or hotel loans. If operations resemble a business, a commercial hospitality loan may fit, with business underwriting and larger equity.
• Bridge or private capital. Short-term funding can help you acquire while you plan a refinance or operational change.
• Seller financing or project changes. In some cases, sellers or HOAs can offer financing or amend rental-pool rules, though this takes time and coordination.

Smart due diligence checklist

Before you write an offer, verify the details in writing. A few hours up front can save months later.

• Legal and HOA documents: Look for rental-pool requirements, hotel-style services, required revenue sharing, and limits on owner occupancy.
• Management agreements: Check for exclusive reservation rights or resort-operator control and any blackout dates.
• HOA health: Review minutes, budget, reserve study, and master insurance. Inadequate insurance or reserves can block loans.
• Unit features: Some specialty lenders require a full kitchen and minimum square footage. Know your unit’s specs.
• Rental history: Gather occupancy, nightly rates, seasonality, and any marketing contracts. Verify who collects and remits lodging taxes.
• Agency eligibility: Ask your lender to check project status in Fannie’s Condo Project Manager and similar tools. If flagged as a condo hotel, plan for non-QM, portfolio, or commercial.
• Local compliance: Confirm city or county STR permits, spacing rules, license needs, and lodging tax obligations. Make sure permits can transfer, or adjust your income model.

Common Cle Elum scenarios

• Scenario A: Residential-style condo with no hotel services and no rental pool. If the project meets agency standards, conforming or FHA/VA options may be possible. Verify status in Fannie’s condo tool before you shop rates.
• Scenario B: Resort-managed unit with nightly rentals and revenue sharing. Expect non-QM, portfolio, DSCR, or commercial loans with 20 to 40 percent down and strong reserves.
• Scenario C: Plan to convert usage or amend HOA rules. Over time, you may be able to move the project toward warrantable status, but it requires HOA action and lender rechecks.

What to do next

1. Request the full HOA package and any rental or management agreements before you offer. You are looking for hotel-like features and rental pool language.
2. Have your lender run the project through Fannie’s Condo Project Manager and check other agency lists. A condo-hotel flag means you will need a specialty path.
3. Compare quotes from portfolio, non-QM, DSCR, and commercial lenders side by side. Budget for higher down payment, reserves, and rate.
4. Confirm your operating plan fits local rules and taxes. Account for Cle Elum permit rules, county lodging taxes, and state sales and lodging tax in your projections.
5. Assemble your team. An experienced lender, a real estate attorney for document review, a CPA for lodging taxes, and an insurance broker for master and HO-6 coverage will reduce surprises.

If you want a clear plan that aligns financing, operations, and resale in Cle Elum, let’s talk. Our team understands resort properties and premium condos, and we tailor strategies that balance lifestyle and return. Start a confidential conversation with Sean Nielsen today.

FAQs

Can I use FHA or VA to buy a Cle Elum lodge condo?

• Usually not if the project operates like a hotel, since FHA excludes condo hotels and VA typically requires an approved, primarily residential project.

What exactly makes a condo a “condotel” to lenders?

• Hotel-style operations like nightly rentals, a front desk, mandatory rental pools, revenue sharing, or owner-occupancy limits often trigger the condo-hotel classification.

How do Cle Elum STR permits affect income and resale?

• City permits have spacing limits, renew annually, and may be nontransferable, which can change income projections and your buyer pool at resale.

What down payment do condotel lenders usually require?

• Specialty and non-QM options often ask for 20 to 40 percent down with strong cash reserves and slightly higher rates.

Can a condotel become warrantable later?

• Possibly, if hotel-style features or rental-pool clauses are removed and the project meets agency standards, though it can take time and HOA action.