Best loan type for short term rental?

Question

Fist time posting... Looking at purchasing my 1st short term rental and wanted to know if there is any strategy to the loan type i get.  Is interest only the best route and refinance later on down the road or since rates are so low, capitalize on this for long term gain and do conventional?

Edward Wodziak · Answer

Like Joshua said depends on your situation,  how long you want to hold it 2 years, 10 years or 30 years or more? Or your want to cash flow right away or don't need the money now, and paid it off aggressively within 10 to 15 years? There's probably other situation that I can't think of

John Underwood · Answer

Depends.

I would not do an interest only loan.

Conventional or 10% down 2nd home if you will stay there some during the year.

Joshua Strickland · Answer

I’m personally a big fan of the 15% down investment loan products with fixed 30 year debt. Vacation home loans require as little as 10% down and interest rates are 1/2 point better, but you start to skate the mortgage fraud line. Plus with investment loans the right lender can use projected income to help qualify the property in case of DTI issues if you purchases multiple properties quickly.

Mark McManus · Answer

Thank you Josh for replying. I have options when it comes to loan. I can do either. DTI isn't an issue either. I have options, so this questions isn't about what CAN i qualify for. I'm asking what is the best strategy, cheaper route long term and least amount of cash up front vs. X, Y, Z.

What would be the most ideal scenario?

Joshua Strickland · Answer

Depends on your situation. Conventional will have low rates as long as you qualify from a DTI stand point. Vacation rental loan is good if you plan to occupy it for part of the year and have some self use. DSCR is great is you have capital but can’t qualify for conventional.