Hotel conversions

What are hotel conversions?

Old hotels are often redeveloped into strata title units and then sold to investors. Converted hotels and motels are sometimes quite similar to normal units, and in other cases they may not have kitchens or bathrooms but rather shared facilities on each floor.

These are not to be confused with strata title hotel / motel properties that are still used as a hotel or motel, however the individual rooms are owned by investors and rented to the hotel. These types of properties have more in common with serviced apartments than normal units.

How much can you borrow?

First home buyer: 85% of the property value.

Investor: 85% of the property value.

Low doc: 80% of the property value.

Discounts: Some interest rate discounts may be available depending on the lenders that will accept your hotel unit as security.

Note: Most lenders restrict the amount you can borrow quite significantly if they approve the loan at all. In some cases you may be able to borrow up to 95% of the property value, depending on the nature of the property.

What about strata title hotel properties?

If you are buying a property that is a unit located in a hotel and leased to that hotel then different lending guidelines apply.

First home buyer: Not applicable

Investor: 80% of the property value for serviced apartment style hotel units.

Low doc: 70% to 80% of the property value.

Note: All properties of this nature are considered on a case by case basis.

Why are the banks so conservative?

Banks are conservative when lending to converted properties because these properties do not appeal to as many people as normal houses. In some cases the units are used as a serviced apartment or cannot be legally occupied by the owner.

Ultimately the bank wants to protect themselves and also to protect you. For this reason they limit the amount that you can borrow and assess the liklihood that the unit will be rented on an ongoing basis or that it will be able to be sold if you choose to do so in the future.