The Quick Read: A brand-new condotel unit can only be underwritten on projected income, because it has no trailing 12-month record to show a lender. History-based qualification is for seasoned units that already have a real operating record. The choice is often made for you by the calendar, and the real decision is whether to buy now on a projection or wait and season the unit first.
- A new unit has no owner-level history, so projection is the only basis available at purchase.
- A seasoned unit with about 12 months of results can be underwritten on actual income.
- Projections are usually discounted, and not every program accepts them on a condotel.
- Short-term rental purchases typically reach up to 75% LTV, and refinances about 70%, subject to lender guidelines.
- Clearing the coverage test is not the same as positive cash flow.
Side-by-Side
The table below shows published industry norms for each basis, set next to how files in Lendmire’s wholesale network typically behave. Programs differ by lender, and every file is reviewed individually.
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| Factor | Projected income | History (T-12) |
|---|---|---|
| Review basis | Third-party STR data or appraiser analysis | Actual trailing 12 months of results |
| Typical use | Purchases with no record | Refinances and seasoned units |
| Documents | STR market report, appraiser narrative | Platform, manager, or pool statements |
| Property types | New-build and pre-opening condotels | Operating condotels with a record |
| Entity vesting | LLC often allowed, per program terms | LLC often allowed, per program terms |
| Timeline | Starts at purchase | Starts after a full operating year |
| Reserves | Vary by lender, leverage, and loan size | Vary by lender, leverage, and loan size |
| Main risk | Model may overstate a launch year | Seasonality and a thin or distorted record |
The best fit depends on one fact: does the unit already have a record? If it does not, the right-hand column is closed for now.
What Is a Condotel, and Why Is It Underwritten Differently?
A condotel is a condo unit inside a hotel-style building, run through a front desk and a rental program. Owners often face use limits, and some documents require participation in a rental pool. Per LegalClarity, revenue is typically split between owner and operator, and personal use is restricted. The same explainer notes that agency-backed financing generally excludes hotel-type projects, which pushes these purchases into the non-QM lane.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. That is why a DSCR file can work here at all.
For an overview of the product itself, Lendmire’s complete DSCR loans guide covers the basics. This article deals only with the income question.
Key Terms Defined
DSCR: The debt service coverage ratio, which is the property’s rental income divided by the full monthly obligation (principal, interest, taxes, insurance, and HOA dues).
Projected income: An estimate of what the unit should earn, built from market data or an appraiser’s short-term rental analysis rather than from results.
History (T-12): The actual trailing 12 months of income from the property itself.
Rental pool: A program where the operator books and manages units and shares revenue with owners.
Expense factor: A reduction a lender applies to gross short-term rental income before running the ratio.
How Does a Lender Build the Projected Number?
Most projections start with an STR market report or an appraiser’s short-term rental analysis, or both. AirDNA attaches a Comp Set Strength score of Low, Medium, or High to each projection. That score reflects how many similar comps sit nearby, how closely they match, and how tightly their revenue clusters.
The score matters more for condotels than for a typical house. A unit in a hotel-style building may have few true comps, so a Low score is a warning about the number, not a technicality. AirDNA also describes its figures as host revenue, meaning nightly rates and cleaning fees net of platform fees and taxes, not the guest’s checkout total.
The appraisal form is a separate trap. Form 1007 is the comparable rent schedule, and Fannie Mae’s appraiser guidance notes it can be used for condominium investment properties. But it documents monthly market rent, not nightly rates or business income. For that reason, appraisers typically supply a separate short-term rental income narrative when a program wants one.
From there, lenders usually discount the figure. The size of the discount varies by lender and by the strength of the comp set. Across a network of lenders, the discount is a common reason two programs return different coverage on the same unit.
What Does Projection Risk Look Like?
Projections are built from established comps, and a launch year rarely behaves like an established one. VaultSTR reports that independent tests put property-level projections 15% to 30% off actuals, usually high, and suggests underwriting year one at 60% to 75% of the projection. That is one commentator’s rule of thumb, not an industry standard. Still, the direction of the risk is clear.
Some investors find models coming in low instead. The practical response is the same either way: run the file more than once. Use the discounted projection, a stress case, and a long-term-rent case. If the deal only works on the most optimistic version, that is a signal about the deal, not the lender.
When Projected Income Is the Better Fit
Projection is the right basis when the unit has no record and the buyer wants to purchase now. For a new condotel, it is usually the only basis, so the question is really about whether the program fits.
It suits an investor who:
- Already hosts or owns income property. Short-term rental files typically expect about 12 months of landlord or host experience, and some programs reserve projection-based qualification for experienced operators.
- Has a strong comp set. A High Comp Set Strength score and a clear match to hotel-style inventory make the number defensible.
- Has the equity and credit to carry a tighter structure. Short-term rental purchases typically reach up to 75% LTV on the strongest files, with a 640 minimum score and a coverage floor of 1.00, subject to lender guidelines.
- Has confirmed the legal basics.
- Plans to season the unit and refinance later onto a history basis.
Projection is the weaker choice when the file clears only on the optimistic number, or when a mandatory rental pool puts booking control in the operator’s hands. Some programs decline pooled condotels entirely, because the investor does not control the collateral’s use. Voluntary programs usually read very differently.
When History Is the Better Fit
History is the stronger basis whenever it exists. It replaces a model with a record, and a record is harder to argue with. Short-term rental refinances typically sit around 70% LTV, and cash-out on short-term rental collateral also tops out near 70%, with a 1.00 coverage floor on refinances. That is a lower leverage ceiling than a purchase, but the underwriting question is simpler.
It suits an investor who:
- Owns a seasoned unit with about 12 months of platform payouts, manager statements, or pool statements.
- Wants to refinance or pull equity after a full operating year.
- Would rather qualify on what the unit did than on what a model says it might do.
History has its own problems. Seasonality can distort a single year, and a thin or irregular record can look worse than the underlying asset. A pool statement also is not history for a new unit. Pool statements are the operator’s own records, and a building that just opened cannot produce a full year of them. Some programs do not accept condotels at all, and others require operating history on them, which would exclude new units. Verify that per program.
Lendmire’s piece Projected STR Income vs. Booking History for a DSCR Cash-Out Refinance covers the refinance side in more depth.
The Numerator Problem
The income figure is not always the same kind of number on each side. A projected figure may be gross market revenue, discounted and then reduced by an expense factor. A historical figure may already be net of the operator’s split. If the lender counts the pool split twice, or not at all, the ratio moves.
The denominator needs care too. DSCR compares income to the full monthly obligation, which includes HOA dues. Condotel dues can be heavy, sometimes bundling resort or pool fees. That is why a unit with attractive nightly rates can still fall short.
Run it as a ratio. Say a discounted projection covers the full obligation at about 1.25x. A stress case at lower occupancy might land near 1.05x. Long-term rent alone might fall below 1.00x. When the long-term case is below 1.00x, a few paths exist. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. Blended short-term income and interest-only structures are other options a lender may review. Qualification is subject to lender guidelines, credit approval, and property review.
And clearing 1.00x is not positive cash flow. DSCR leaves out repairs, vacancy, management, utilities, and capital reserves.
Same Unit, Two Files
Consider one hypothetical unit, run twice.
File one, at purchase. The unit is pre-opening. The lender relies on an STR analysis, applies its discount and expense factor, and lands at a coverage ratio that clears the program floor with modest room. Leverage tops out at 75% LTV on the strongest files, and the borrower brings reserves, commonly around 6 months of PITIA, though this varies by lender and loan size.
File two, after a full year. The unit now has 12 months of statements. The lender underwrites actual results. If the year came in near the projection, the ratio holds and the refinance proceeds at the lower refinance leverage ceiling. If actuals came in below the projection, coverage falls, and the borrower may face a smaller loan, a longer wait, or a decision to hold.
The important point is that the second file is not a repeat of the first. Leverage drops on the refinance side, but certainty rises. An investor who plans around both files from day one is rarely surprised.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Preparing the File Before You Offer
A condotel file has more moving parts than an ordinary rental. Gather these before writing an offer:
1. The rental management agreement and any pool terms, including whether participation is mandatory.
2. Operator disclosures and the HOA or declaration language on rentals and owner use.
3. An STR market report with a strong comp set, and confirmation of the Comp Set Strength score.
4. Evidence that short-term rentals are permitted for the building.
5. HOA budget, dues, and master insurance information.
6. Your own hosting or landlord experience and reserve statements.
7. Entity documents if vesting in an LLC, subject to lender program eligibility.
Credit expectations also matter. A 640 score is the short-term rental floor, while stronger tiers want more.
What If Actuals Miss the Projection?
If year one lands under the projection, the refinance is the pressure point. A lower ratio can mean a smaller loan or a thinner cash-out. Waiting another few months to improve trailing results may help, and so may revisiting the operator arrangement. A miss is a financing event and an investment event at the same time.
Keep the two risks apart. Financing risk is whether the program accepts the file and at what leverage. Investment risk is whether the unit earns enough to be worth owning. A deal can clear the first test and fail the second. Resale and exit liquidity are also thinner for condotels, which is worth weighing before buying. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
The Balanced Verdict
Neither basis is better in the abstract. Projection is the only door open on a new condotel, but it leans on a model that tends to run optimistic in a launch year. History is stronger evidence, but a new unit cannot offer it.
For an experienced investor with equity, a strong comp set, and a voluntary rental program, buying on a discounted projection and refinancing onto a history basis later is a defensible plan. For a first-time host buying into a mandatory pool with few comps, waiting for a seasoned unit may be the wiser call. If the only way the numbers clear is on the rosiest case, that tells you something about the deal itself.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals.
Frequently Asked Questions
Do I need operating history to get a DSCR loan on a new condotel?
No, not at purchase. A new unit has no history, so some programs accept a projection from an appraiser’s STR analysis or a market-data report. Not every program does, and some reserve this for experienced investors. History becomes the basis later, typically after about 12 months of operation.
Can I use the developer’s pro forma as my income?
Usually not on its own. A seller’s or developer’s projection is not an independent source, so lenders generally prefer third-party market data or an appraiser’s analysis. A pro forma can support your planning, but it rarely carries the file by itself.
Is the projected income discounted?
Typically yes. Lenders usually apply a haircut and an expense factor before running the coverage ratio, and the size varies by lender. This is why the same unit can show different coverage across programs.
Can I hold a condotel in an LLC?
Often yes, since DSCR is a business-purpose loan, subject to lender program eligibility. Whether a personal guarantee is required is program-specific.
Can I live in the unit or use it personally?
Not as an owner-occupant under these programs, and rental-program documents often cap owner use. Personal use can also change tax treatment, so confirm with a qualified tax professional.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork, a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors focused on short-term rentals can review DSCR loans for Airbnb and short-term rentals.
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References
1. LegalClarity: How a Condotel Works for Owners and Investors
3. Fannie Mae Appraiser Update
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Run STR Loan Numbers on a Condotel for a Resort Buyer · How to Refinance a Paid-Off Airbnb on Actual Income With a DSCR Loan · Short-Term History vs New Lease Income on a DSCR Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.