Seeking Advice on Financing an Airbnb/Short-Term Rental

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Seeking Advice on Financing an Airbnb/Short-Term Rental

Frank PyleBusiness Member
Specialist · USA · Member since 2024 · 279 posts · 130 votes

My client recently purchased a home with a hard money loan and have successfully rehabbed it for use as an Airbnb rental. It has been operating for 2 months now. Our lender has informed us that we need 12 months of rental history to use the actual rent for financing purposes, or we must rely on the appraiser's fair market short term rental value. The challenge we're facing is the lack of short term rental data for the appraiser, and we won't know if it will meet the debt service coverage ratio (DSCR) requirements until the appraisal is complete.

Has anyone dealt with a similar situation? Do you have any suggestions on how we can secure long-term financing under these circumstances?

Thanks in advance for your help!

[email protected]317-501-3467
Frank Pyle at ExP Realty
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Trevor Finn
Real Estate Consultant · Columbia, MD · Member since 2017 · 160 posts · 55 votes
1y

Hi @Frank Pyle,

**I am not affiliated with any of the companies mentioned**

To secure long-term financing for your Airbnb, look for DSCR lenders that accept pro forma income instead of requiring 12 months of rental history. Use tools like AirDNA or Mashvisor to provide market data on projected rental income and occupancy rates, and make sure your lender works with appraisers familiar with short-term rentals. If your current lender can’t accommodate you, explore STR-focused lenders like Host Financial or Lima One Capital, or consider bridge loans to buy time while you build your rental history. Providing strong supporting data from your Airbnb bookings, market comps, and STR reports will strengthen your case and help you close faster!

Good luck! 🚀

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  • Katie Smith
    Member since 2023 · 348 posts · 190 votes
    1y

    Hi Frank!

    Do you have an idea of the long-term rental amount, and would that be sufficient to meet the DSCR ratio needed to qualify for the loan? Is the current lender requiring a 1007 as part of the full appraisal? If so, the 1007 will provide a rental income estimate that could be used to structure the loan as a long-term rental rather than a short-term rental.

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  • Frank PyleBusiness Member
    OP
    Specialist · USA · Member since 2024 · 279 posts · 130 votes
    1y

    The short term rental amount is the unknown because a 1007 has to be done by the appraiser and the value will be at their discretion.  The lack of short term rental data available to the appraiser concerns me.  I have financed several short term rentals and the above average value properties have been a challenge to get a supportive 1007.

    [email protected]317-501-3467
    Frank Pyle at ExP Realty
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    NEXA Lending- Investors Edge Concierge
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  • Brandon Croucier
    Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes
    1y

    You need to work with a lender that will utilize STR 1007 Data and/or AirDNA Income on a REFI.

    Tough deal but we do this consistently.

    2Reply
  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
    1y

    Agree with @Brandon Croucier on this one, its an underwriting guideline that you would need to dig into before you get too far. If you discovered the issue before paying for the appraisal that could hopefully save some costs (in case the appraiser is with the wrong AMC).

    Pre-vetting with the lender on rental history/AIRbnb/1007 as well as seasoning could help. 

    Happy to help connect if it would be beneficial.

    Good luck!

    [email protected]417-427-2612
    0Reply
  • Jeff ChisumPro Member
    Lender · All 50 States · Member since 2020 · 248 posts · 142 votes
    1y

    Our DSCR product is very STR friendly and heavily lean on AirDNA data vs appraisal. We also have shorter seasoning periods than most for cash out. Worth a discussion if you want to send me a DM I can connect you with my team's DSCR specialist. It's worth mentioning that we have been working with same investor for four years and we are fully delegated with them. We process, underwrite, close and fund the loan. We don't like to deal in "maybe's, let try, etc…".

    0Reply
  • Trevor Finn
    Real Estate Consultant · Columbia, MD · Member since 2017 · 160 posts · 55 votes
    1y

    Hi @Frank Pyle,

    **I am not affiliated with any of the companies mentioned**

    To secure long-term financing for your Airbnb, look for DSCR lenders that accept pro forma income instead of requiring 12 months of rental history. Use tools like AirDNA or Mashvisor to provide market data on projected rental income and occupancy rates, and make sure your lender works with appraisers familiar with short-term rentals. If your current lender can’t accommodate you, explore STR-focused lenders like Host Financial or Lima One Capital, or consider bridge loans to buy time while you build your rental history. Providing strong supporting data from your Airbnb bookings, market comps, and STR reports will strengthen your case and help you close faster!

    Good luck! 🚀

    2Reply
  • Elias HalvorsonBusiness Member
    HI · Member since 2024 · 225 posts · 130 votes
    1y

    This isnt a tough deal as some have alluded to above. Any mortgage broker should have 10-20 lenders which can do this deal. The DSCR lender will likely rely on both the 1007 and the AIRDNA info, sometimes at the lender's discretion (which one they will use for income calculation).

    One thing I am curious of - typically many of the hard money lenders will charge a 1-3 year pre-payment penalty in these types of scenarios unless your client paid points to not have that pre-payment penalty. Do you know if there is a pre-payment penalty? If so, youll want to do the calculations if it makes sense to immediately refinance or wait the year until the penalty goes away. 


    808-517-6416
    Elias Halvorson C2 Hawaii NMLS#1697041HI Branch NMLS#1244222 585 Reviews
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  • Andrew Zamboroski
    Lender · Member since 2021 · 495 posts · 130 votes
    1y
    Quote from @Frank Pyle:

    My client recently purchased a home with a hard money loan and have successfully rehabbed it for use as an Airbnb rental. It has been operating for 2 months now. Our lender has informed us that we need 12 months of rental history to use the actual rent for financing purposes, or we must rely on the appraiser's fair market short term rental value. The challenge we're facing is the lack of short term rental data for the appraiser, and we won't know if it will meet the debt service coverage ratio (DSCR) requirements until the appraisal is complete.

    Has anyone dealt with a similar situation? Do you have any suggestions on how we can secure long-term financing under these circumstances?

    Thanks in advance for your help!

    As others have said, the right DSCR lender should be able to do this. We have used actuals and projections from air dna to come up with rent. Happy to help if I can.

    cheers!
    0Reply
  • Frank PyleBusiness Member
    OP
    Specialist · USA · Member since 2024 · 279 posts · 130 votes
    1y
    Quote from @Elias Halvorson:

    This isnt a tough deal as some have alluded to above. Any mortgage broker should have 10-20 lenders which can do this deal. The DSCR lender will likely rely on both the 1007 and the AIRDNA info, sometimes at the lender's discretion (which one they will use for income calculation).

    One thing I am curious of - typically many of the hard money lenders will charge a 1-3 year pre-payment penalty in these types of scenarios unless your client paid points to not have that pre-payment penalty. Do you know if there is a pre-payment penalty? If so, youll want to do the calculations if it makes sense to immediately refinance or wait the year until the penalty goes away. 

    Thx for input.  There is no prepayment penalty.


    [email protected]317-501-3467
    Frank Pyle at ExP Realty
    WebsiteView Page
    NEXA Lending- Investors Edge Concierge
    View Page
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  • Frank PyleBusiness Member
    OP
    Specialist · USA · Member since 2024 · 279 posts · 130 votes
    1y

    We don't know until we get it appraised and get a 1007.

    [email protected]317-501-3467
    Frank Pyle at ExP Realty
    WebsiteView Page
    NEXA Lending- Investors Edge Concierge
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    0Reply
  • Elias HalvorsonBusiness Member
    HI · Member since 2024 · 225 posts · 130 votes
    1y
    Quote from @Frank Pyle:

    We don't know until we get it appraised and get a 1007.


     Hey Frank, not sure who you're replying to but I want to emphasize based on what you said pretty much EVERY mortgage broker should have 10-20 options of lenders who can do this. Your particular lender is likely a mortgage banker with few options to farm it out to. I would outline your scenario to a few local mortgage brokers - with everything you've said this seems like a pretty easy deal. 

    808-517-6416
    Elias Halvorson C2 Hawaii NMLS#1697041HI Branch NMLS#1244222 585 Reviews
    WebsiteView Page
    0Reply
  • Frank PyleBusiness Member
    OP
    Specialist · USA · Member since 2024 · 279 posts · 130 votes
    1y

    Will do.  THX

    [email protected]317-501-3467
    Frank Pyle at ExP Realty
    WebsiteView Page
    NEXA Lending- Investors Edge Concierge
    View Page
    0Reply
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