Financing Short-Term Rental Properties in Summit County

by Brandon Doza

Financing Short-Term Rental Properties in Summit County

Summit County is a unique market where many properties, especially condos are used as short-term rentals. While that creates great opportunity, it also adds a layer of complexity when it comes to financing.

If you’re considering a property that allows nightly rentals, here are a few key things to understand.

What Is a Non-Warrantable Condo?

Condominiums are classified based on whether they meet guidelines set by Fannie Mae and Freddie Mac.

A non-warrantable condo simply means the project falls outside of those guidelines.

In Summit County, this often happens when:

A large number of units are used as short-term rentals
The building operates similarly to a hotel (condo-hotel or condotel)
Ownership of the complex is concentrated among a few owners (for example, one person owns 10 out of 20 units)
The HOA’s financials don’t meet standard criteria (such as low reserves or pending litigation)

This classification doesn’t mean something is wrong with the property—it just affects how it can be financed.

Why Financing Looks Different

Because these properties fall outside of conventional guidelines, financing works differently than a typical primary home.

From a lending perspective, there is more risk involved—primarily due to the variability of rental income and the nature of the property itself.

In general, buyers can expect:

Higher interest rates
Larger down payment requirements
Additional financial reserves after closing to account for potential vacancies
Longer closing timelines while the lender reviews project documents
In some cases, a second appraisal may be required

These adjustments reflect the added complexity that comes with rental-heavy properties.

How Rental Income Is Treated

Short-term rental income is a big part of why buyers are drawn to Summit County—but it’s not always counted at full value when qualifying.

There are a few common approaches:

Conventional-style approach:
Uses a portion of estimated rental income (reduced for vacancy and expenses) to help with qualification. This may be supported with a lease agreement, along with proof of first month’s rent and a security deposit.

Historical approach:
Requires a track record, typically two years of rental income to use it fully. If the property has a short-term rental history, tools like AirDNA can help estimate potential income.

DSCR loans:
DSCR stands for Debt Service Coverage Ratio. Instead of focusing on the borrower’s personal income, this approach looks at whether the property’s rental income can cover its monthly expenses (mortgage, taxes, insurance, and HOA dues).

For example, if a property generates $4,000 per month and the total monthly payment is $3,000, the income supports the property. This is often documented through an appraiser’s rent schedule.

Condo-Hotels

Condo-hotels (or condotels) are common in areas like Breckenridge, Frisco, Copper Mountain, and Keystone. These properties often include front desks, shared management, and hotel-style amenities.

From a financing standpoint, they fall into a more specialized category due to their hybrid use as both residential and hospitality properties. This structure can add complexity, including additional risk considerations if the property were to go into foreclosure, depending on how the project is structured.

How to Set Yourself Up for Success

If you’re thinking about purchasing a short-term rental in Summit County, a little preparation goes a long way.

Here’s how to get ahead:

Get pre-approved early with a lender familiar with non-warrantable condos
Ask about the specific complex before writing an offer
Understand your financing options upfront so there are no surprises
Work with a local team that understands the nuances of mountain properties

Short-term rental properties in Summit County offer strong lifestyle and investment potential but they don’t fit into a one-size-fits-all financing box.

Understanding how condo classifications, rental income, and property type all interact can help you make more informed decisions and avoid surprises along the way.

Brandon Doza
Mortgage Loan Officer
MPA Home Loans
(970) 389-2278
Apply Now
brandon@mpahomeloans.com
HomeLoansWithBrandon.com
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