Does str income supplament towards montly payment any?

Question

Looking at str with income records from a year ago.

Will that income account for some of the monthly payment like multiunit would for 75% of the monthly offsetting that monthly payment able to get into a bigger property thanks

Alex Breshears · Answer

Like others have posted, the answer to this is "it depends" and the part that is depends on is the type of financing you are trying to get for the property. For example, if you are doing a conventional loan, maybe buying it as a "second home" to be used for you and your family a few weeks a year and then offered as a STR the rest of the time, they will generally not use income from the property because you are buying it as a second home in the eyes of the lender.  That will be something you must qualify for and your DTI can support.  Second, if you are looking at more of an asset backed loan, DSCR or maybe even a private loan or reaching out to a hard money lender, they may include the rental income. I've talked to lenders that will allow a certain percentage of the income that is stated on AirDNA, especially if the property doesn't have any income history to show at all. Really get the lender dialed in and then look for the property.

Another point I wanted to bring up, bigger is not always better. I own STR's in addition to lending out my own capital.  My business model caters to DINKS (dual income, no kids) so our properties are smaller, set up for pets, and are close to things our ideal guest would want to do. We look for properties that have a 0.01% nightly rate compared to purchase price.  When you find those, generally the property pays for itself in 7 to 10 nights.  Depending on where you are looking to invest, there is likely a sweet spot of purchase price to nightly rate you will want to figure out before investing, along with decide who your ideal guest is. Right now with record inflation, a lot of leisure travel is getting cancelled by Americans who are feeling pain at the pump and the grocery store, so wherever you decide to buy really look at WHY someone would be there, HOW long are they staying, WHO are they, and would they come here frequently enough to pay the debt and offer you some cashflow for your time spent managing it (which can be a lot, especially when standing up a new unit!)

Caroline Gerardo · Answer

Are you asking Does STR proposed rental income offset your debt to income ratio for a conventional loan? Answer: no. Mine government doesn't use STR as income they use what the appraiser says is long term rental in his appraisal or the lease with checks whichever is lower.

Or are you asking  Does the STR I am getting on an existing property count towards qualifying for a new loan. Well kinda yes or no. If you have the STR for a whole year on your IRS 2021 return and can show you bought say at Christmas 2020 then the NET income is used not the gross.

Or are you asking  Can I trust the STR income seller claims? Well no. You can't verify his income taxes. He can show you VRBO and AIRBNB rolls but refunds and expenses aren't in there. You cannot predict the city or neighborhood will continue to allow STR so himm answer is a cloudy maybe

Kathy Henley · Answer

@Skyy Dugger All rental income goes into the kitty for operating the investment property. Please ask the Seller for a current income statement. This might be on the Schedule E of the Seller's 1040 tax filling for 2022 or, a printout from the listing platform (AirBnb and such.) If the Seller has neither, analyze the income with long term market rent rate, as the property might not be a STR at the moment.

One cannot express the monthly expenses as a percentage of the income until your have some numbers. Call the area utility companies and ask. How big will be the monthly loan payment? The interest is an expense. Call an insurance agent and get a policy quote. What about set-asides for capital repairs? What does the place need in the next few years?

We can invest in a bigger place when we find a good deal.