Any DSCR lenders for STR that use AirDNA & allow seller financing for down payment?

Question

Looking for lenders that service TN that will use AirDNA to determine DSCR for short term rental AND that will allow the seller to finance (second position) the portion of the purchase price not covered by the main DSCR lender... has anyone ever had any success finding one?  In other words, lets say the DSCR lender will only lend 75% LTV but they will be ok with the seller financing the other 25% so an actual cash down payment won't be necessary.  I know it will be slightly riskier for the main lender but most of the risk will be taken by the seller since they would be second position.  Thanks!

Robin Simon · Answer

Yes - just need a screenshot to prove the listing is live and one successfully completed booking

Stacy Raskin · Answer

If you're an experienced investor, there are lenders that will take the annual rent from AirDNA and take a 20% expense factor for a DSCR loan if a 1.2 ratio. Or if for easy Math, the expenses of mortgage taxes and insurance of $1,000 or less are supported against $1,200 of monthly rent.

Using AirDNA can be a better way to structure a DSCR loan since long term rent surveys often come in lower than expected which can be the deal impossible to do as the rent is too low on the survey to support the expenses. I've never heard of a lender allowing full seller financing for the contribution. I've heard of seller contributions for up to 6% on DSCR loans.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. They don't consider borrower income.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. Market rents from the appraisal and/or the actual rents need to cover the mortgage payment, property insurance, taxes and HOA (if applicable).

4. Prepayment penalties range from 1-5 years and you get to decide the length of the term. The longer the term, the less of an impact on the rate.I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350 Insurance = $100 Association Dues = $50

Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100 Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

DSCR loans can be used for purchases and for cash out refinances. Most lenders allow you to vest individually or as an LLC.

Jayson Cain · Answer

Hi @Rich Manfredi, I'm based in Southern California, but I have started my out-of-state real estate journey in Indianapolis. Now, I have a portfolio of Short Term Rentals and Long Term Rentals.

I've also helped other investors with their DSCR loans and flip projects. Happy to share my experiences and chat with you more if you're interested.

Daniel Christopher · Answer

@Zach Edelman is correct on this. We're a DSCR lender and have access to all DSCR programs on the market that allow for STR/AirDNA income for underwriting and there are none that allow for second lien positions.

Zach Edelman · Answer

While there are lenders out there that will allow for you to underwrite for Air DNA, most if not all of these lenders are true DSCR lenders, and as a result, require first and sole lien position on their loans. I do not know of any lender's that would allow for both an Air DNA underwrite and allow for a seller to finance second position. Sounds like a very risky loan from a lender perspective.

Nick Belsky · Answer

@Rich Manfredi

I work with a lender who can do 90CLTV with seller financing.  It is a double close.  The 2nd position seller financing must close prior to the 1st position closing/funding.  Both can be done at the signing table in one day, but everyone has to check everyone.  30 year fixed rate, fully amortized loans.  The 1st position lender will only go up to 75LTV, though so with the remaining 25LTV, the seller would need to finance at least 15LTV to have you bring in the minimum of 10LTV.  Those numbers can move around, but you must bring at least 10LTV.  This is a no ratio loan, so long as it's a 1-4 unit property.  The AirDNA won't be needed, but can be as compensating factor.

The rates do tend to run about a point higher than others, but you are paying for the flexibility that few will offer.  Trade off.

Cheers!

Christian Ehlers · Answer

Try MyInvestorLoan.com I'm not 100% sure about their Short Term Rental lending guidelines but I have seen them be okay with having a seller finance loan in 2nd position.

Erik Estrada · Answer

Yes. But there are some areas that are considered Rural, and will have an LTV reduction

Rich Manfredi · Answer

Thanks!  Do you offer these types of loans in TN?