Can air bnb income be used to help qualify for a loan

Question

I am under contract to purchase a house with a ~600sf guest house in the back yard of the property that has been used the past 3+ years for Airbnb.   It is my intention to continue to use it for STR and it should pay for the entire mortgage.  I was planning on using the income from the property to help me qualify for a loan at a higher amount than my W2 job could qualify me for without this income.  My question is this, I have one lender who thinks it is no problem to be able to use this boarder income to help qualify, one that says air bnb income cannot be used to help qualify and I would need a signed lease to use rental income, and a 3rd that says the only way that I can use the income is if it is zoned as a multifamily property and I get a loan as an investor which means higher property taxes and rates.  Hearing 3 very different things, I am pretty confused as to who is right, any help is appreciated!

Danny Randazzo · Answer

@Jacob D Adamczak it depends on your lender's requirements for the loan. @Troy Gandee would be a good local expert to help figure out a solution

Jacob D Adamczak · Answer

@Jerry Padilla

It is zoned as single family. I have seen a few similar properties with this ADU/Guest house type unit but most properties don't have any detached unit.

That was always my plan if the airbnb did not work was to use the unit as a long term rental and at first I was told that wasn't allowed either but this was eventually resolved as I talked to more lenders and we have found a creative solution.   I do have 3 years of history for the Airbnb. Thank you for your input!

Troy Gandee · Answer

@Jacob D Adamczak @Danny Randazzo is correct. It's depends entirely on the lender. The problem is that so many municipalities are restricting them, so many lenders don't even want to try. If it's an ADU, they're more likely, but there's just so many local restrictions with zoning and code enforcement for them to gamble on it. I'd just ask your lender. A lot of people are scared to ask their lender specific questions, but your lender wants to close the loan so they can get paid. Tell them what you want/need and they'll be more successful in helping you navigate the transaction.

Jacob D Adamczak · Answer

@Troy Gandee that was my impression as well but then some people were telling me that the income was ineligible, even if I was to rent it out long term instead of Airbnb.  I was eventually able to find two lenders that were able to make it work, one with an FHA loan and the other with Homeready loan.  I think I am going to go with the Homeready loan because I wont have to refinance to cancel out the PMI.

Jerry Padilla · Answer

@Jacob D Adamczak

How is this property zoned? Is it zoned multi-family or a single family with an accessory dwelling? Is this type of property common for the area if it is an accessory dwelling?

The appraisal will look at it as a long term rental  and you be able to use 75% of this given amount to count towards your income, with FHA. Home Ready will require 15% down if it is considered a multi-family. Home Possible requires a 2 year history now to include the rental income. This was a change made this year.

Conventional lending does not consider short term rental income, only long term rental income.

Jacob D Adamczak · Answer

I am aware that I would need to apply for this permit once I take ownership of the property and I know it is zoned for air bnb, and the previous owner has been approved for the city.  I just talked to another broker this morning that seems to think I can use the boarder income if I go FHA instead of homeready loan, it seems like the more people I ask the more different answers I get.If I go as an LLC or Corp I have two questions, as a first time investor, will I get a loan as an LLC? Secondly, in Charleston you have to be an owner occupant to run an air bnb so can I still claim owner occupancy if I buy under a LLC?  I would be living in the main house.

Michele Wax · Answer

Depends on a few variables. I think you need to know the laws of your state/city about the air bnb.  If you use a tax return and showed a profit from the air bnb it would be taken into account if you were under an LLC or a Corp.

I would be very careful about the laws of your state/city if you are renting it out as a air bnb you could get into trouble depending where you live.

I did a quick search and I found this https://www.charleston-sc.gov/1520/Short-Term-Rental-Ordinance-Process  do you have a short term rental permit?

If you are not legal you will be getting shut down as per the new law in the city.

Can air bnb income be used to help qualify for a loan

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