Rental Property Investor · NJ (nj) · Member since 2018 · 23 posts · 14 votes
We have a 12 unit under contract and the property is beachfront in a section of Atlantic City that will do well for Air Bnb. We ran a couple test ads and have spoke with other local operators that do not have the supply for the demand. Currently, it's rented to year-round residents, but some are month-to-month. If the theory is correct we can increase annual incomes by AirBnB'ing a couple of the units as they turnover....especially May through Sept.
We are buying the property regardless and like the current numbers as the current rents are below market. But we like trying new things, and if we plan on refinancing after 24-36 months, I wonder how a bank would looked at this type of hybrid use. Appreciate any thoughts.
Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
7y
Hey @Mike Parlante! Our investment group doesn't really dive into the hybrid model but one of my property managers does. However, he hasnt yet gotten into selling or refinancing it (he didnt have plans to), so I can't provide exact information on this.
However, I feel the lenders will likely take the average rent you are getting from the other units and would apply it to those units, or they'll look at the market average for the area for both the expenses and the income for comp properties.
Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
7y
Hey @Mike Parlante! Our investment group doesn't really dive into the hybrid model but one of my property managers does. However, he hasnt yet gotten into selling or refinancing it (he didnt have plans to), so I can't provide exact information on this.
However, I feel the lenders will likely take the average rent you are getting from the other units and would apply it to those units, or they'll look at the market average for the area for both the expenses and the income for comp properties.
Rental Property Investor · NJ (nj) · Member since 2018 · 23 posts · 14 votes
7y
Thanks @Jaysen Medhurst , yes we baked that in to our analysis. Frankly, there is a laundry list of items that make Atlantic City, and NJ as a whole, undesirable for investment but we're being very conservative.....buying for cash flow now in areas that have the greatest likelihood for appreciation.
Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
7y
@Mike Parlante a lender would more than likely require it to be stabalized with 90% occupancy and would actually not likely use short term income to support. Even if an appraisal is done you would still have to provide lease agreements to qualify the proerty based on its only income. If you plan on going full docs instead and using more of your own financials then it might not be an issue. But if the lender is looking more at DSR debt service ratio then I don't ee you being able to qualify if majority of income is from AirBnb. That is just my personal experience as short term/vation rentals are becoming more popular but are still not widely excepted.
Rental Property Investor · Morristown, NJ · Member since 2015 · 25 posts · 3 votes
7y
@Mike Parlante Hi Mike, I invest in Atlantic City as well. Many banks don't want to lend in AC for a whole host of reasons. I would talk to local banks first, but just buyer beware.
Rental Property Investor · NJ (nj) · Member since 2018 · 23 posts · 14 votes
7y
Thanks @Les Armour . We're aware of that and I look forward to seeing how this plays out. We now have two properties under contract, a 6 unit around the corner from this 12 unit. We've been working on both properties since April and began with getting the assessment from one of our current lenders on our other portfolios, happens to be from Ocean First. The 6 unit we're buying cash and will look to refinance after 15 months. Again, AC has all of things that turn many investors off, i.e. rent control, high taxes, high insurance premiums. However, we're buying beach block property cheap enough, that cash flows now, and will hopefully appreciate pretty nicely if AC benefits from Stockton University, SJ GAS, the Orange Loop project initiatives. Worth taking a shot.
We have a 12 unit under contract and the property is beachfront in a section of Atlantic City that will do well for Air Bnb. We ran a couple test ads and have spoke with other local operators that do not have the supply for the demand. Currently, it's rented to year-round residents, but some are month-to-month. If the theory is correct we can increase annual incomes by AirBnB'ing a couple of the units as they turnover....especially May through Sept.
We are buying the property regardless and like the current numbers as the current rents are below market. But we like trying new things, and if we plan on refinancing after 24-36 months, I wonder how a bank would looked at this type of hybrid use. Appreciate any thoughts.
Best
Mike Parlante
MDM Holdings Co
Mike, I don't think you will have issues getting financing. They will just look at the numbers.
Do you have a current portfolio loan with Ocean First?
Rental Property Investor · NJ (nj) · Member since 2018 · 23 posts · 14 votes
7y
Thanks @Kurt Kwart . Yes, we currently have 12 properties in a portfolio loan with Ocean First and a commercial loan on a single property. All in South Jersey as well