Cash Out ReFi Condo?

Question

I am considering branching out into a new market for myself. Beach front condos to establish as Air BnB locations. I'm looking for a little bit of insight from someone who may already be doing this or something similar. The condos are generally studio with about 400 sqft of space. They also generally have HOA fees ranging from $400-$600. It would be of great help if someone knew if it was possible to cash out ReFi a condo the same way as a SFH for the BRRRR method. Additionally, if anyone is familiar with the Air BnB process, any extra information would be greatly appreciated.

Alex Bekeza · Answer

@Chuck Hupert One thing you'll want to know about BRRRing condos that makes it totally different than 1-4 unit residential is whether that condo is warrantable or non warrantable. Most beach front Air BnB Condos operate more like condotels, are primarily investor owned, and would likely be deemed non warrantable which, with most lenders, would limit max LTV to 60-65% if they'd even finance it. Here is a great article that breaks down the differences but ultimately you'll want to use the condo questionnaire provided by your lender.

https://www.valuepenguin.com/mortgages/non-warrantable-vs-warrantable-condosThe other issue with BRRRRing Air BnB properties is that most lenders will require additional STR seasoning on top of whatever their normal title seasoning req. is.  Typically lenders want to see 1-2 years of STR operating history.  Luckily, this can be supplemented by the previous owners history in SOME circumstances. Generally speaking, this makes BRRRRing Air BnB's difficult in my experience but I look forward to seeing what others chyme in with here. I know of commercial options that will entertain the deal w/o STR operating history but they're on the high end of the spectrum of commercial pricing options for sure.  Although, that may not be a big deal if you're making a great deal of money every month from the nightly rentals. The bigger issue is the LTV restrictions.

Hope this helps!

Melvin List · Answer

@Chuck Hupert in Florida you should be able to do a limited review to 70%