Yes, you can own a hotel room. The arrangement is called condo-hotel ownership, and it gives you a recorded deed to a specific unit inside a working hotel, along with a shared interest in the lobby, pool, and other common areas. The unit is real estate you can sell, refinance, or leave to your heirs. But the ownership sits inside a management agreement, a rental pool, tax rules that cap your personal stays, and financing rules that shut out most conventional lenders, so the deed is only the beginning of the story.
What a Condo-Hotel Actually Is
A condo-hotel, sometimes shortened to “condotel,” starts as a hotel that a developer subdivides under a condominium declaration. Each unit is sold to a private buyer who receives a deed, and that buyer owns the unit outright plus an undivided interest in the shared spaces: lobbies, hallways, fitness centers, restaurants, parking structures.
From a guest’s perspective nothing looks different. The front desk checks people in, housekeeping cleans the rooms, the concierge books dinner. Behind the scenes, individual rooms belong to different owners, and those units cycle in and out of a hotel-managed rental pool. The brand operates the property; the owners collect a share of the room revenue their units generate.
How It Differs From a Timeshare
These get confused constantly, and the difference matters. A condo-hotel gives you year-round, deeded ownership of a specific physical unit. You can sell it, borrow against it, or pass it to your heirs. It appreciates or depreciates with the real estate market, and you carry the result either way.
A timeshare gives you the right to use a property for a limited window each year. Some are deeded fractional interests; many are right-to-use contracts that grant access for a fixed term, often 20 to 99 years, with no real property ownership at all. The gap shows up hardest at resale: a condo-hotel unit trades on the open real estate market, while timeshares are notoriously hard to unload and often sell for pennies on the dollar.
The Management Agreement and Revenue Split
When you buy, you sign a management agreement with the hotel operator. That contract is the engine of the arrangement. It places your unit into a rental pool alongside other owners’ units, and the operator runs everything: marketing, bookings, housekeeping, maintenance, guest services.
Owners typically receive somewhere between 40% and 70% of the gross room revenue their unit generates.1Hotel Executive. Condo Hotel Developments and Hotels With Residential Rental Programs Are Fraught With Complexity That percentage sounds workable until you notice it often applies to revenue after “above the line” deductions have already reduced the base. Travel agent commissions, online booking platform fees, credit card processing charges, and marketing costs come off first. The headline split matters less than the actual net distribution per occupied night, which the property’s financial disclosures should let you calculate.
Rental income is never guaranteed. Condo-hotel units cannot legally be marketed as investments with projected returns without triggering securities registration requirements. Occupancy rises and falls with tourism, the economy, and the operator’s competence.
What You Can and Can’t Do With Your Unit
Ownership gives you the standard real estate bundle. You can sell, refinance, or transfer the unit through a will or trust, and any appreciation is yours.
The restrictions are what surprise buyers. Management agreements typically cap personal use at somewhere between 30 and 90 days per year. Federal tax rules add their own ceiling under Section 280A of the Internal Revenue Code: if your personal use exceeds the greater of 14 days or 10% of the days the unit is rented at fair market value, the IRS treats the unit as a personal residence rather than a rental property, which sharply limits what you can deduct.2IRS. Topic No. 415, Renting Residential and Vacation Property If your unit is rented 200 days a year, exceeding 20 days of personal use flips it into residence territory.3Office of the Law Revision Counsel. 26 USC 280A – Disallowance of Certain Expenses in Connection With Business Use of Home, Rental of Vacation Homes, Etc.
You also can’t redecorate. Every room must match the brand, and your management agreement will require periodic renovations at your expense through a furniture, fixtures, and equipment (FF&E) provision. FF&E reserve contributions typically run 3% to 5% of gross revenue, and a full room refresh every seven to ten years is standard. Expect the operator to dictate bedding, fixtures, and finishes. Most agreements also include peak-season blackout periods when you cannot use your own unit, because those high-revenue nights are reserved for paying guests.
Ongoing Costs Beyond the Purchase Price
The purchase price is the start, not the total. Recurring costs directly reduce net returns:
- HOA fees covering common area maintenance, shared amenities, and building insurance on the structure.
- Property taxes assessed on your individual unit.
- A “walls-in” unit insurance policy (often called an HO-6) covering the interior and personal liability, separate from the building’s master policy.
- FF&E reserve contributions toward periodic replacement of furniture, fixtures, and equipment.
- Special assessments for major capital work like roof replacements, elevator modernization, or building-wide technology upgrades.
These costs hit whether the unit is occupied or not. In a weak year, expenses can exceed rental income and turn the unit into a cash drain.
Tax Rules That Shape Your Returns
Three provisions of the federal tax code do most of the work.
Personal Use Limits Under Section 280A
Stay under the 14-day or 10% threshold and the IRS treats the unit as a rental, allowing you to deduct operating expenses, depreciation, and other costs against rental income. Cross the threshold and the unit becomes a residence for tax purposes; you can still deduct expenses, but only up to the amount of rental income the unit generates, so the property cannot produce a tax loss.3Office of the Law Revision Counsel. 26 USC 280A – Disallowance of Certain Expenses in Connection With Business Use of Home, Rental of Vacation Homes, Etc.
Passive Activity Loss Rules Under Section 469
Even below the personal use ceiling, rental losses face another hurdle. Under Section 469, rental income is generally passive, so losses can only offset other passive income, not salary or business earnings. Excess losses get suspended and carried forward.4Office of the Law Revision Counsel. 26 USC 469 – Passive Activity Losses and Credits Limited
Two exceptions soften the rule. If you actively participate in managing the rental, which is a stretch in a condo-hotel context because the operator handles everything, you may deduct up to $25,000 in rental losses against ordinary income, but only if your adjusted gross income is under $100,000. That allowance phases out completely at $150,000. If you qualify as a real estate professional by spending more than 750 hours per year in real estate activities and more than half your total working time on them, rental losses stop being automatically passive. Most condo-hotel buyers qualify for neither.
Depreciation
You can depreciate the building component of the unit’s value, though not the land. Whether the recovery period is the 27.5-year residential schedule or the 39-year commercial schedule depends on how the property is classified for tax purposes, and the difference significantly affects the annual deduction. A tax professional familiar with hospitality real estate should make that call. One clean benefit: if you eventually sell at a loss or dispose of the unit, all suspended passive losses from prior years become fully deductible in the year of disposition.4Office of the Law Revision Counsel. 26 USC 469 – Passive Activity Losses and Credits Limited
Financing a Condo-Hotel Unit
This is where many buyers hit a wall. Condo-hotel units are classified as non-warrantable condominiums, which means Fannie Mae and Freddie Mac will not back them. Fannie Mae’s selling guide expressly lists projects “managed and operated as a hotel or motel, even though the units are individually owned” as ineligible, along with any project featuring rental pooling, blackout dates, occupancy restrictions, or hotel-type services.5Fannie Mae. Ineligible Projects
That leaves portfolio lenders, credit unions, and specialty lenders willing to keep the loan on their books. The practical results:
- Down payments of at least 25% for a primary or second home, and up to 40% if the lender classifies the unit as an investment property.
- Interest rates above conventional mortgage levels.
- Appraisal difficulty, because comparable sales are scarce and appraisals sometimes come in lower than expected.
- HOA scrutiny, with lenders reviewing the association’s budget, reserves, litigation history, and foreclosure rate before approving.
Some buyers pay cash and skip the lending problem entirely. That trade puts a large amount of capital into a single illiquid asset.
When the Sale Is a Security, Not Just Real Estate
Not every condo-hotel purchase is a plain real estate transaction. Under the Supreme Court’s test from SEC v. W.J. Howey Co., a transaction becomes an investment contract, and therefore a security, when it involves an investment of money in a common enterprise with an expectation of profits derived from the efforts of others.6U.S. Securities and Exchange Commission. The Last Chapter in the Book of Howey A unit sold with a mandatory rental program, where the buyer’s return depends entirely on the operator, can meet all four elements.
The SEC has focused on three red flags: sales pitches that emphasize economic returns from the operator’s efforts, mandatory participation in a rental program, and pooling of rental revenues across units. When all three appear, the sale likely needs to be registered as a securities offering or fit within a valid exemption. Well-structured projects avoid this by making rental participation voluntary and refraining from projecting income during marketing. A court has held that a properly structured voluntary rental program is a sale of real estate, not a security.7The National Law Review. Condo Hotels – What’s the Reality? Sale of Real Estate or Security
If a developer is pitching specific income projections or requiring you to join a rental pool as a condition of purchase, ask whether the offering has been registered with the SEC or qualifies for an exemption. A vague answer is a serious warning sign.
Resale Realities
Condo-hotel units can be harder to sell than traditional condos. The buyer pool is narrow because financing is difficult and the product is unfamiliar to most residential buyers. You may be competing directly with the developer, still selling new units in the same building at prices that undercut yours. And unlike a conventional condo, the buyer is evaluating not just the unit but the management agreement, the operator’s track record, and the property’s occupancy trends.
Operator risk sits on top of that. If the hotel brand exits or the management company defaults, the property can lose its flag, along with the reservation system, loyalty program, and brand recognition that drive bookings. A de-flagged condo-hotel can see occupancy and unit values drop sharply. Before buying, read the management agreement’s termination provisions to understand how long the operator is committed and what would let them walk away.
In strong resort or urban markets with capable operators, a condo-hotel can offer a genuine mix of personal use and rental income that a traditional vacation home cannot. The complexity is real, though, and the gap between the marketing pitch and the financial reality is wider here than in most forms of real estate. Read the management agreement before the brochure, run the numbers with actual occupancy data rather than projections, and get the tax treatment reviewed by someone who understands both real estate and hospitality.