Condo Financing and Air BNB’s

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Obtaining a home loan on a condo is a unique process.  In addition to getting yourself approved, the condo project itself has to pass a home loan eligibility test.  While a condo project / HOA may pass the home loan sniff test, buying a condo requires you look into the future and not just the “now.”

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Condo Financing Hurdles

One hurdle in the condo financing process is entity ownership.  Once a single entity owns a disproportionately large number of the condo units, any unit in the condo project becomes difficult if not impossible to finance.

So what happens if your condo project of choice does not have a single entity with an overgrown share of ownership.  You are good right?  Right now… yes.  However condo projects are ever evolving.  They constantly grow and change.  So while a condo project may be eligible for financing today, things could change.  In the future the same condo project may no longer be eligible for financing.  That can impact the condo unit’s value and/or make selling your condo more difficult.

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Condo’s and Air BNB’s

The Air BNB trend is one to be on the lookout for as a prospective condo owner.  This new business venture is surging in popularity.  Investors buy a condo and then rent it out short-term – very short-term as in 2 days to a week at a time.  This activity by itself does not hurt a condo project.

However, the investor looking to build an inventory of these Air BNB units does pose a threat.  Once an investor buys a glut of units the condo project can violate mortgage condo requirements making it impossible for new buyers to finance in that project.  Many HOA’s that are hip to this new trend are restructuring their CC&R’s.  They are included verbiage restricting short-term rentals (short-term = less than 30 days usually).  This type of foresight keeps the Air BNB’s away and protects your interest in your new condo.

Check your condo with your lender AND review your condo’s CC&R’s!

By Jeremy House

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