Financing for Mammoth Lakes Condo Hotels

After the house of cards came crashing down in 2008, there has been a standstill for financing on all condos located within complexes that are considered “condo hotels”. Many prospective buyers who have come to Mammoth in search of the right vacation home (which they can also rent out to help offset the costs of ownership) have had to come in with cash to purchase.

Not only did the lending industry tighten up requirements for those looking to qualify for a loan on a primary residence, but the first to go was the “investment property” or “condo hotel” from most portfolio lenders’ pool of funds, and eventually, all lenders. Why did this happen? Or, what caused lenders to stop financing most condo purchases in resort areas? Well, from what I understand, this restriction was due in large part to the Las Vegas condo hotel boom, and buyers flooding in to purchase based on the speculation to make rental income. This eventually led to the classification for any and all resort condos (new or old) that had a rental office onsite to be blacklisted in the lending industry. Both Bank of America and Chase will not loan on any condo purchases in Mammoth Lakes. Wells Fargo Home Mortgage, Mammoth Lakes is the only lending institution that has been successful in funding loans for condos that were once included in the “condo hotel” classification.

This lending restriction has impacted property values negatively as purchases for these types of properties are limited to cash buyers. However, there has been no shortage of cash buyers flooding in to buy these discounted “condo hotel” type units. If the price is right, there are usually multiple offers on bank-owned properties or “REOs” (Real Estate Owned) that drive the price up over the asking.

The classic “condo hotels” such as the Village at Mammoth, which includes Grand Sierra Lodge, Lincoln House and White Mountain Lodge, Westin Monache and Juniper Springs Lodge have seen their share of distressed properties hitting the market over the past few years. It is clear that a “bottom” has been reached at these developments with strong price support ranging between $215,000 and up for the 1-bedroom units and $350,000 and up for the 2-bedroom units. Many prospective cash buyers take a look at the convenience of either being slope side at the Juniper Springs resort or being in the center of it all (complete with Gondola access direct to Canyon Lodge, shopping, dining and entertainment), not to mention the impressive rental income that most of these units generate, and they can’t deny it’s a great lifestyle and future investment purchase at rock-bottom pricing. The Westin Monache, which is located across the street from the Village at Mammoth, offers modern and stylish condo hotel suites, which have also been selling for rock bottom prices. Out of any of the “condo hotel” projects, the Westin Monache is clearly the winner when it comes to the highest grossing rental income numbers in town.

Over the past few months, we’ve actually seen a couple of financed sales close for condo hotel units at the Village at Mammoth, Westin Monache, and Juniper Springs Lodge. One of these lenders provided me with approximate terms and rates. “Loan programs offered are for a term of 30 years, fixed for the first 3, 5 or 7 years, then becoming adjustable afterwards. Rates will be in the low 5”s assuming 740+ credit. Zero point programs for a $900 loan origination fee. The minimum credit score requirement is 680, tough exceptions have been made. 70% financing for second homes and 50% for investment properties”. Property qualifications include that condo hotel suites must have a full kitchen and bath, be a minimum of 500 SF, with no lending for studio units.

This could be the first sign of easing of lending restrictions, which has held the housing market and property values down over the past few years. Prior to the financial crisis, as lenient as lenders were, they went 180 degrees in the opposite direction, and went overboard by overregulating the lending market. This is what has unfairly held qualified and responsible buyers with income and credit scores out of the market. Once financing becomes widely available for these condo hotels, pent-up demand will add to the competition, which will clear out the supply of the already low inventory, and prices will most likely begin to increase…

Verena Robinson, Broker/Owner
CA BRE License #01512209
Mammoth Lakes Resort Realty
tel. (760) 924-8521
verena@mammothlakesresortrealty.com