Is it possible or practice to fund an Airbnb property using Hard money lending? If so, what do example terms and process/timeline, loan payback typically look like?
As some of you know, I'm new to the REI business focusing on wholesaling now with the intent on diversifying into buying and holding short term rentals for building an Airbnb portfolio.
Maybe is my answer. There are instances where it makes sense to use hard money then refi out. If you are buying a fixer upper and getting a bargain on the purchase then this makes sense. (hint)Look for a hard money company that also does refi loans and you can chain one loan into the other. If you are buying a pretty house and paying retail, then banks are a better option.
@Josh Caldwell Excellent idea for a HM route. Thanks for the tip!
@Josh Caldwell Josh, do you think hard money strategy can be employed for securing a multi unit (4 units residential) if secured with a HM lender who will refinance the original loan after a specified period of time? Im imagining there would be a heafty interest rate, deposit of some type and perhaps 1-3 point required. I'm looking to secure a 4-unit property for my first investment property for a short-term rental portfolio.
The first question that you need to answer is how profitable is your 4 unit? What are you expecting the monthly income to look like? It all revolves around cash in VS cash out. I dont lend in your state, so I am not trying to sell you anything but if I could find a way to buy a cash flow property and have my tenants pay for it, I would be darn interested.
@Josh Caldwell Current average occupancy rates for AirBB are around 22 days, at say $100 per day, that's $2200 p/mo. Taking into consideration market location, etc.. Less expenses: Loan repayment, other fixed codts (utilities, amenities, cable, Internet), cleaning company costs and if employed property management services. This is approximately $8800 gross per month. Although just a rule of thumb and not a formal valuation, the 50% rule suggests at least 50% ($4400) will go out in such expenses. Netting $4400. Give or take expenses. This also assumes only 22 days in rental and does not consider higher performance months during which occupancy rates exceed 22 days in rental.
That is a LOT of money to repay debt You can use hard money to secure it, and then refi out with a bank !!
@Josh Caldwell Yes. Is this something that would be challenging for a new company seeking to refinance with a conventional loan through a bank? My business hasn't any established credit yet, I'm working on it.
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