Construction Loan after Recent Vacation Rental Purchase?

4 Replies

Anyone have suggestions tactically for how I would go about getting a new loan (likely a construction loan) on a new property after recently closing on a vacation rental within the past year?

For the sake of illustrating the question, here are some hypothetical numbers

Need - 500k construction loan

Have - $15000 in monthly income and 6500 in debt payments (primary mortgage, vacation rental mortgage, car) - 43% debt to income ratio. 

New loan would make it something like 58% debt to income. 

The vacation rental is cashflow positive, has a 5 year record of gross rentals of $100k, and will cashflow positive this year. So not only does that offset the payment, but it actually adds income to the equation, but I am being told that until there are 2 full years of financial records on the house/business, all the debt counts but none of the income counts.

Are there strategies to get around this? Construction-to-perm loan servicers who are more creative in how they look at things?

Is the construction loan for your primary home or for an investment property? You can always look at commercial loan for investment property construction and NO DTI will be looked at.

Look at the commercial loans. You should be able to get a loan with 20% downpayment depending on the value of the property and the area of the property along with 100% loan amount for construction.

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What are typical rates on commercial loans? It will essentially be a second h ome/investment vacation rental - mountain house that we use 20 days a year and rents for hopefully 150-200 days a year

Look into Private money construction loans. They are project-specific, not income-specific, and most likely can help you get to construction. Just make sure you have permits (or are working on it) and a contracted CCB picked out.

Here are two other quick numbers...because you will have to bring some cash unless the property has a bunch of value.

85% LTC