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Creative Real Estate Financing

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Lei Lu
  • Investor
  • Los Angeles, CA
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Mortgage - How to get a second Short term rental mortgage?

Lei Lu
  • Investor
  • Los Angeles, CA
Posted Jan 13 2022, 14:19

Hi BP family,

Happy new year! Any suggestions on how to get mortgage on second short term rental property within the same year of getting the first short term rental property?

Thanks!

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Alex Roter
  • Financial Advisor
  • Los Angeles, CA
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Alex Roter
  • Financial Advisor
  • Los Angeles, CA
Replied Jan 13 2022, 15:30

Hey @Lei Lu what type of issues are you running into regarding financing on the second STR?

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Lei Lu
  • Investor
  • Los Angeles, CA
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Lei Lu
  • Investor
  • Los Angeles, CA
Replied Jan 13 2022, 17:50

@Alex Roter:

Hi! I am shopping around for a mortgage for a short term rental. 

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Joseph Bafia
  • Investor
  • Raleigh, NC
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Joseph Bafia
  • Investor
  • Raleigh, NC
Replied Jan 14 2022, 15:44

We've bought several STRs within the same year. All done through various forms of financing. Second home loan, DSCR & owner financed all done this year. Are you getting denied for some reason or just asking the general question?

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Lei Lu
  • Investor
  • Los Angeles, CA
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Lei Lu
  • Investor
  • Los Angeles, CA
Replied Jan 17 2022, 11:12

@Joseph Bafia

Thanks for the reply! I am getting ready for the second STR and looking for lenders. Any lender you recommend for condotel mortgage? Thank you :)

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Albert Bui
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  • Lender
  • Bellevue WA & Orange County, CA
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Albert Bui
Pro Member
  • Lender
  • Bellevue WA & Orange County, CA
Replied Jan 23 2022, 08:47
Originally posted by @Lei Lu:

@Joseph Bafia

Thanks for the reply! I am getting ready for the second STR and looking for lenders. Any lender you recommend for condotel mortgage? Thank you :)

You’ll encounter resistance if you purchase another second home in the same market but if you have no rentals or second homes in the specific market then it should be pretty straight forward Lei.

With conventional terms you’ll be able to put down as low as 10% and you’ll get rates similar to a primary residence. 

It’s important to note that Fannie and Freddie will be changing pricing adjustments on 4/1/22 and effectively make second homes as expensive as investment properties in terms of rates and pricing adjustments. However the advantage second homes will still be that you can put down as low as 10% down versus investment properties 1 unit, the min is 15% down. Other then down payment second home financing will go by the way side because the advantages at this point will go to financing as an investment property. 

Investment properties are easier to qualify when your DTI is tight because you can use market appraised rental income (75% of gross- PITIA) to help you offset your mortgage and qualify. This is not afforded to you when you apply as a second home, on a second home application you have to qualify for the entire PITIA payment or principal interest taxes insurance and assessments yourself personally with all of your other income.

It will be interesting as we will have to shift our mortgage planning for all of our STR OR SHORT TERM rental clients going into this new change come, 4/1/22 for second homes.


Hope that was helpful and good luck on your investing.


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Joseph Bafia
  • Investor
  • Raleigh, NC
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Joseph Bafia
  • Investor
  • Raleigh, NC
Replied Jan 23 2022, 20:09

We used Visio for a DSCR loan on one of our properties. 20% down and higher than 2nd home rates, but easy to work with. We have been able to get more than 1 STR with traditional financing , but we had a solid DTI to allow that.

Hope that helps!

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Michael Weigum
  • Real Estate Agent
  • Surfside Beach, SC
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Michael Weigum
  • Real Estate Agent
  • Surfside Beach, SC
Replied Jan 23 2022, 20:40

Condotel’s are what we deal with every day in Myrtle Beach, SC and there are not many lenders that will finance them. However, I work with a couple that do a great job. I just closed on my second unit last Friday. I’d be happy to put you in contact with my lender.

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Albert Bui
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Albert Bui
Pro Member
  • Lender
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Replied Jan 27 2022, 22:56

@Beth Johnson

  • Lender Georgia (#1780583), Oregon (#1780583), Virginia (#1780583), Florida (#1780583), Oklahoma (#1780583), Colorado (#1780583), Washington (#1780583), California (#1780583), Texas (#1780583), Idaho (#1780583), and Tennessee (#1780583)

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