Mortgage on Airbnb property

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Mortgage on Airbnb property

Craig McLaughlin
Rental Property Investor · Robins, IA · Member since 2015 · 45 posts · 18 votes

I am thinking about using a recently acquired property for solely Airbnb. I am curious if anybody has been able to get a bank to do a cash out refinance on an investment property that has no lease? My plan is to buy with cash, do a little updating, furnish it, put on Airbnb, and then 6 mo to a year later, do a cash out refinance. Thanks in advance.

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Patricia Taveras
New Bern, NC · Member since 2017 · 246 posts · 173 votes
4y

@Craig McLaughlin

Hi Craig. I just did a cash out refinance on two with Visio Lending. They are DSCR loans so the interest rate is higher than bank loans. They used the historical income of the properties to qualify them, and the title and mortgage have to be held in an LLC. The properties have been running as STR since 2019. There are other lenders out there who will do this as well.

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  • Salwa Arafa
    Member since 2021 · 13 posts · 8 votes
    4y

    Hi Craig! I did a cash out ReFi on a Condo here in Cinci OH and the property wasn’t rented so no leases. The underwriting asked us to date and sign a letter stating how much we were planning to rent the property for. Depends on the lender. Hope this helps.

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  • Andy Turnauer
    Lender · Member since 2018 · 21 posts · 6 votes
    4y

    The lease isn't how the loan is underwritten/approved.  It is underwritten based on the debt to income ratios.  If you need to show the income because you need it to qualify then you need to show a lease.

    On a cash out verses no cash out, some lenders will allow you to do a purchase money first and a second for the work to be done. You'll have to go to a regional bank or smaller. Somewhere you can talk to the banker who is involved in the approval decision or already talk to the loan committee. A smaller bank, or a Bank that has 2 to 4 location/branches where the loan committee is local. This is a lender who still sees the value in customer service and still underwrites based on the 4 Cs. These are still relationship based on possibly not selling all their loans to FHLMC/FNMA in the secondary market. They don't mind being creative or even if they sell all their firsts, they may be willing to hold their second and HELOC s.

    Establish a few of these relationships because they tend to be slow and or stop lending at times.

    Expect to pay a little higher rate but being able to get the deal done.

    Also I don't know I'd share if I was going to use the property for AirBNB.

    Regarding the second, work to be done loan, you'll need to have a complete plan of the work to be completed.  Bides if possible and time to complete.  Don't forget to have a contingency for work that pops up once you open a wall or whatever.  They should give you a100% of your budget.

    hope this helps

    1Reply
  • Patricia Taveras
    New Bern, NC · Member since 2017 · 246 posts · 173 votes
    4y

    @Craig McLaughlin

    Hi Craig. I just did a cash out refinance on two with Visio Lending. They are DSCR loans so the interest rate is higher than bank loans. They used the historical income of the properties to qualify them, and the title and mortgage have to be held in an LLC. The properties have been running as STR since 2019. There are other lenders out there who will do this as well.

    3Reply
  • Alan Lacey
    Lender · Grand Rapids, MI · Member since 2019 · 175 posts · 82 votes
    4y

    You can do a traditional fan. Or Freddie loan with home being vacant and using rental rate from comparable rent schedule, but it will only be based on traditional rental comps.

    1Reply
  • Ryan Hehman
    Realtor · Washington, DC · Member since 2013 · 91 posts · 32 votes
    4y

    Second Patricia's comment above - Visio can do this without a problem, and the appraiser will take into account short term rental rate info from AirDNA to qualify the unit's debt service coverage ratio.

    3Reply
  • Michael PorchePro Member
    Rental Property Investor · Boise, ID · Member since 2017 · 220 posts · 101 votes
    4y

    Hey Craig! Thats a pretty easy one to solve actually. You can create a master lease agreement between you and your LLC that may be holding it. Or since airbnb is a business you create an LLC for that business and have it sign a lease with you. I have done this a few times, is that helpful?

    0Reply
  • Craig McLaughlin
    OP
    Rental Property Investor · Robins, IA · Member since 2015 · 45 posts · 18 votes
    4y

    Thanks everybody for the responses.

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y

    @Craig McLaughlin There are lenders that can do short-term rental DSCR Loans. They look at AIRDNA for rental income.

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
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