Arizona BP! First time investor. Looking at short term rentals.

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Arizona BP! First time investor. Looking at short term rentals.

Christian Blumel
Rental Property Investor · Member since 2022 · 3 posts · 1 vote

Hey guys. I’m new here I have a question regarding your experience with loans for purchasing a short term rental property in Scottsdale Arizona. I currently live in CA and have a business here. My question is do most lenders require 25% to 30% down on an any “investment” property out of state? This is what I’ve been told from the lending team for Merrill Lynch at Bank of America. Im liquid but are there any loopholes to decrease the initial downpayment? Any advice and guidance is appreciated. Thank you for your time.

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
3y
Quote from @Christian Blumel:

Hey guys. I’m new here I have a question regarding your experience with loans for purchasing a short term rental property in Scottsdale Arizona. I currently live in CA and have a business here. My question is do most lenders require 25% to 30% down on an any “investment” property out of state? This is what I’ve been told from the lending team for Merrill Lynch at Bank of America. Im liquid but are there any loopholes to decrease the initial downpayment? Any advice and guidance is appreciated. Thank you for your time.


DSCR loans right now (which is typically the best option for short term rental financing) are at minimum 20% down but generally falling around 25% down in this climate. Banks and conventional lenders can likely offer higher leverage and better terms, but are likely being very cautious in this environment, especially about an emerging and economy-dependent asset class like STRs, so reliability and certainty of close with them will be much lower

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  • Paul DefnginPro Member
    Lender · Rockville, MD · Member since 2008 · 498 posts · 199 votes
    4y
    Quote from @Christian Blumel:

    Hey guys. I’m new here I have a question regarding your experience with loans for purchasing a short term rental property in Scottsdale Arizona. I currently live in CA and have a business here. My question is do most lenders require 25% to 30% down on an any “investment” property out of state? This is what I’ve been told from the lending team for Merrill Lynch at Bank of America. Im liquid but are there any loopholes to decrease the initial downpayment? Any advice and guidance is appreciated. Thank you for your time.


    If you're going the path of conventional loans (FNMA & FREDDIE MAC), then that down payment is really meant to minimize the exorbitant pricing on second homes or investment properties. Minimum down payment for 2nd homes is still 10%. Minimum down payment for investment home is still 15% but the amount that you'll pay is crazy. This will stay like this until the GSE's change their policies. Now, that said, your best bet is to look at a DSCR type of loan or seek the help of a Credit Union or local community bank who does not sell their loans. They can probably still go in at 10% to 20%.

    0Reply
  • Christian Blumel
    OP
    Rental Property Investor · Member since 2022 · 3 posts · 1 vote
    4y

    @Paul Defngin thank you Paul!!

    0Reply
  • Salvador Auciello
    Lender · Irvine CA · Member since 2019 · 71 posts · 22 votes
    4y

    I have seen first time investor No ratio DSCR at 80% LTV no income loan.

    1Reply
  • Tristan Pearrow
    Lender · St. Augustine · Member since 2022 · 60 posts · 32 votes
    4y

    Hi Christian and welcome to BP. If you're speaking to banks, the numbers will always be worse for investment properites. You'll find lower downpayments through a direct lender who can also work with wholesale partners to find you a prodcut that fits the down payment you're looking for. 

    2Reply
  • Mick Hofmann
    Real Estate Agent · Scottsdale, AZ · Member since 2018 · 46 posts · 22 votes
    4y

    @Christian Blumel there are STR loan programs if you haven't found one yet. PM if you need a local lender. Scottsdale STR market is very saturated and competitive, so you will want to make sure your home is top notch and with a pool to compete.

    2Reply
  • Christian Blumel
    OP
    Rental Property Investor · Member since 2022 · 3 posts · 1 vote
    4y

    All very helpful thank you guys!

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    4y
    Quote from @Christian Blumel:

    Hey guys. I’m new here I have a question regarding your experience with loans for purchasing a short term rental property in Scottsdale Arizona. I currently live in CA and have a business here. My question is do most lenders require 25% to 30% down on an any “investment” property out of state? This is what I’ve been told from the lending team for Merrill Lynch at Bank of America. Im liquid but are there any loopholes to decrease the initial downpayment? Any advice and guidance is appreciated. Thank you for your time.


    I sent you a Direct Message on a house that is a good choice for STR

    0Reply
  • Zach Wain
    Scottsdale, AZ · Member since 2019 · 435 posts · 248 votes
    4y

    @Christian Blumel - You can put as little as 10% down for vacation homes and 15% for rentals, but putting 25% down gets you the best financing terms. 20% down is allowed on a rental, no PMI, but the rate and/or the closing costs are lower with 25% down. That is likely what they were referring to.

    1Reply
  • Dan ShelhamerPro Member
    Realtor · Mesa, AZ · Member since 2015 · 163 posts · 99 votes
    3y

    Your best bet is to get a vacation home loan with 10% down and your rate will be similar to that of a primary home loan except you will also have PMI.

    The main drawback to this from what I've seen is that when rates drop, if you want to refi, you would need to have 75% LTV (25% equity in the home).

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Christian Blumel:

    Hey guys. I’m new here I have a question regarding your experience with loans for purchasing a short term rental property in Scottsdale Arizona. I currently live in CA and have a business here. My question is do most lenders require 25% to 30% down on an any “investment” property out of state? This is what I’ve been told from the lending team for Merrill Lynch at Bank of America. Im liquid but are there any loopholes to decrease the initial downpayment? Any advice and guidance is appreciated. Thank you for your time.


    DSCR loans right now (which is typically the best option for short term rental financing) are at minimum 20% down but generally falling around 25% down in this climate. Banks and conventional lenders can likely offer higher leverage and better terms, but are likely being very cautious in this environment, especially about an emerging and economy-dependent asset class like STRs, so reliability and certainty of close with them will be much lower

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    6Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    @Scott E is a Scottsdale investor. Get in touch and see what he says about local regulations and properties... 

    0Reply
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