STR Rehab Loan w/ high DTI

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STR Rehab Loan w/ high DTI

Nithin Mathai
Member since 2022 · 25 posts · 7 votes

Hi BP friends! I am looking at purchasing a home in Vermont to use as a STR/Airbnb/Vrbo and vacation home for my family. My DTI is too high to qualify for any conventional financing.

I am looking at DSCR loans, but don't see anything specific for STR rehab projects. I do see LTR rehab loans and DSCR Airbnb purchase loans. I have a HELOC for about $200k for any down payment/other expenses, but the whole project including purchase ($280-300k), rehab ($80-100k), and furnishing ($30-40k) will cost about $390-440k.

I am reaching out to lenders right now, but are there any products I should be aware of or creative lending solutions that may work for my circumstance? I’d appreciate any input. Thanks in advance! 

FYI: The house tried to sell previously and during the appraisal process, the appraiser stopped and the bank cancelled the appraisal since the property had not been close to being completed in its renovation. I’d rather avoid buying the house and refinancing it because of this incident.  

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
3y
Quote from @Chris Mury:

@Robin Simon do you have a product for this?

 Yes, we should be able to help.

@Tyler Solomon can you please reach out to @Nithin Mathai to go over options?

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
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  • Leslie Anne Morris
    Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
    3y

    It sounds like you need a fix and flip loan. Instead of the flip you refi out. In your case with high DTI you'd prob need to go the DSCR route which has gotten quite expensive these days. I'd have lenders lined up as you complete the project.

    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y

    Yeah. A DSCR loan will be the way to go, but it's gonna cost ya.

    Have you done all the research on the area that it will support your purchase and rehab price?

    The loan will have to have some kind of due diligence on what it will cash flow.

    0Reply
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    3y

    I think I would use the patience method and wait till I had More money. Or you could bring in a partner but partners usually want someone with a nice track record 

    Podcast Guest on Show #30
    0Reply
  • Chris MuryBusiness Member
    Realtor · St. Augustine, FL · Member since 2017 · 182 posts · 100 votes
    3y

    @Robin Simon do you have a product for this?

    Chris Mury- Realtor543 Reviews
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    2Reply
  • Lyndsay Zwirlein
    Lender · Member since 2020 · 331 posts · 209 votes
    3y
    Quote from @Nithin Mathai:

    Hi BP friends! I am looking at purchasing a home in Vermont to use as a STR/Airbnb/Vrbo and vacation home for my family. My DTI is too high to qualify for any conventional financing.

    I am looking at DSCR loans, but don't see anything specific for STR rehab projects. I do see LTR rehab loans and DSCR Airbnb purchase loans. I have a HELOC for about $200k for any down payment/other expenses, but the whole project including purchase ($280-300k), rehab ($80-100k), and furnishing ($30-40k) will cost about $390-440k.

    I am reaching out to lenders right now, but are there any products I should be aware of or creative lending solutions that may work for my circumstance? I’d appreciate any input. Thanks in advance! 

    FYI: The house tried to sell previously and during the appraisal process, the appraiser stopped and the bank cancelled the appraisal since the property had not been close to being completed in its renovation. I’d rather avoid buying the house and refinancing it because of this incident.  

    There are fix & flip programs for this. Down payment on purchase depends on how many similar projects you’ve done in the last 36 months. If this is your first project, it would likely be 75-80% LTV on acquisition and the lender funds 100% of rehab. 
    1Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Leslie Anne Morris:

    It sounds like you need a fix and flip loan. Instead of the flip you refi out. In your case with high DTI you'd prob need to go the DSCR route which has gotten quite expensive these days. I'd have lenders lined up as you complete the project.


    Thank you for your reply. I will look into this route. From what I’ve seen, the DSCR option is around an 8-9% interest rate which the property can produce enough cash flow for. 
    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Chris Mury:

    @Robin Simon do you have a product for this?

     Yes, we should be able to help.

    @Tyler Solomon can you please reach out to @Nithin Mathai to go over options?

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    3Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Michael Baum:

    Yeah. A DSCR loan will be the way to go, but it's gonna cost ya.

    Have you done all the research on the area that it will support your purchase and rehab price?

    The loan will have to have some kind of due diligence on what it will cash flow.

    From my analysis the property will cash flow with an NOI of $10-20k per year. The property is listed as a single family but it’s actually a triplex with one large 4 bed unit, one smaller 2 bed unit, and one even smaller 1 bed unit. Each has 1-2 baths. It was difficult to find equal size comps with the enemy method, Rabbu, AirDNA, Pricelabs, and Awning. That was the best estimate I could find. Actual property comps were difficult to find as well because it is a multi family, but it looks like the house is somewhere in the 450-500k range. That should be plenty to refinance even if I leave a good amount of money in the deal.  
    0Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Luke Carl:

    I think I would use the patience method and wait till I had More money. Or you could bring in a partner but partners usually want someone with a nice track record 

    I might start reaching out to family/friends as well to see if they have any interest in this. 
    0Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Lyndsay Zwirlein:
    Quote from @Nithin Mathai:

    Hi BP friends! I am looking at purchasing a home in Vermont to use as a STR/Airbnb/Vrbo and vacation home for my family. My DTI is too high to qualify for any conventional financing.

    I am looking at DSCR loans, but don't see anything specific for STR rehab projects. I do see LTR rehab loans and DSCR Airbnb purchase loans. I have a HELOC for about $200k for any down payment/other expenses, but the whole project including purchase ($280-300k), rehab ($80-100k), and furnishing ($30-40k) will cost about $390-440k.

    I am reaching out to lenders right now, but are there any products I should be aware of or creative lending solutions that may work for my circumstance? I’d appreciate any input. Thanks in advance! 

    FYI: The house tried to sell previously and during the appraisal process, the appraiser stopped and the bank cancelled the appraisal since the property had not been close to being completed in its renovation. I’d rather avoid buying the house and refinancing it because of this incident.  

    There are fix & flip programs for this. Down payment on purchase depends on how many similar projects you’ve done in the last 36 months. If this is your first project, it would likely be 75-80% LTV on acquisition and the lender funds 100% of rehab. 

     

    Thanks! I’ll look into this as well. 

    1Reply
  • Wilson Vanhook
    Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
    3y

    Following

    0Reply
  • Wilson Vanhook
    Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
    3y
    Quote from @Robin Simon:
    Quote from @Chris Mury:

    @Robin Simon do you have a product for this?

     Yes, we should be able to help.

    @Tyler Solomon can you please reach out to @Nithin Mathai to go over options?


    Do you have 15% down DSCR loans?

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Wilson Vanhook:
    Quote from @Robin Simon:
    Quote from @Chris Mury:

    @Robin Simon do you have a product for this?

     Yes, we should be able to help.

    @Tyler Solomon can you please reach out to @Nithin Mathai to go over options?


    Do you have 15% down DSCR loans?


     Yes - but not for short term rentals dependent on projections

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    0Reply
  • Wilson Vanhook
    Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
    3y
    Quote from @Robin Simon:
    Quote from @Wilson Vanhook:
    Quote from @Robin Simon:
    Quote from @Chris Mury:

    @Robin Simon do you have a product for this?

     Yes, we should be able to help.

    @Tyler Solomon can you please reach out to @Nithin Mathai to go over options?


    Do you have 15% down DSCR loans?


     Yes - but not for short term rentals dependent on projections


    I'm confused. You have them, but not for STR? What are they for then?

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y

    For DSCR loans on properties that are rented on a long term basis (i.e. 12-month leases) - which are currently viewed as less risky by the market

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    0Reply
  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    If you go the DSCR route, make sure to get multiple quotes from lenders so that you can compare rates and terms. You may be able to find a competitive loan product that is suitable for your needs. It also pays to have lenders lined up before you start the project as it could save time in the long run. Good luck!

    [email protected]832-889-5607
    0Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Jay Thomas:

    If you go the DSCR route, make sure to get multiple quotes from lenders so that you can compare rates and terms. You may be able to find a competitive loan product that is suitable for your needs. It also pays to have lenders lined up before you start the project as it could save time in the long run. Good luck!


     Thank you for the advice Jay! I will definitely do that. 

    0Reply
  • Sara Levy-Lambert
    USA · Member since 2022 · 879 posts · 109 votes
    3y

    It sounds like you're in a difficult situation, as your high debt-to-income (DTI) ratio is making it difficult to qualify for conventional financing for your property in Vermont. In this situation, it may be helpful to explore alternative financing options, such as a loan from a private lender or a portfolio loan from a local bank or credit union.

    0Reply
  • Wilson Vanhook
    Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
    3y
    Quote from @Sara Levy-Lambert:

    It sounds like you're in a difficult situation, as your high debt-to-income (DTI) ratio is making it difficult to qualify for conventional financing for your property in Vermont. In this situation, it may be helpful to explore alternative financing options, such as a loan from a private lender or a portfolio loan from a local bank or credit union.

    Wish I could find some private lenders
    0Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Sara Levy-Lambert:

    It sounds like you're in a difficult situation, as your high debt-to-income (DTI) ratio is making it difficult to qualify for conventional financing for your property in Vermont. In this situation, it may be helpful to explore alternative financing options, such as a loan from a private lender or a portfolio loan from a local bank or credit union.

    I ended up reaching out to DSCR lenders. Thanks! 
    0Reply
  • Richard Line
    Member since 2022 · 1 post · 0 votes
    3y
    Quote from @Nithin Mathai:
    Quote from @Michael Baum:

    Yeah. A DSCR loan will be the way to go, but it's gonna cost ya.

    Have you done all the research on the area that it will support your purchase and rehab price?

    The loan will have to have some kind of due diligence on what it will cash flow.

    From my analysis the property will cash flow with an NOI of $10-20k per year. The property is listed as a single family but it’s actually a triplex with one large 4 bed unit, one smaller 2 bed unit, and one even smaller 1 bed unit. Each has 1-2 baths. It was difficult to find equal size comps with the enemy method, Rabbu, AirDNA, Pricelabs, and Awning. That was the best estimate I could find. Actual property comps were difficult to find as well because it is a multi family, but it looks like the house is somewhere in the 450-500k range. That should be plenty to refinance even if I leave a good amount of money in the deal.  

     If it is listed and zoned as a single family, underwriting will want to see the permits to legally change it to multi-family.  Most likely, that is why the appraiser stopped, he saw it had been converted to multi-family, most likely without the proper permits.  Not too many lenders will allow that, if any.  

    Rick Line NMLS #1069991

    Acra Lending NMLS # 144549

    0Reply
  • Nithin Mathai
    OP
    Member since 2022 · 25 posts · 7 votes
    3y
    Quote from @Richard Line:
    Quote from @Nithin Mathai:
    Quote from @Michael Baum:

    Yeah. A DSCR loan will be the way to go, but it's gonna cost ya.

    Have you done all the research on the area that it will support your purchase and rehab price?

    The loan will have to have some kind of due diligence on what it will cash flow.

    From my analysis the property will cash flow with an NOI of $10-20k per year. The property is listed as a single family but it’s actually a triplex with one large 4 bed unit, one smaller 2 bed unit, and one even smaller 1 bed unit. Each has 1-2 baths. It was difficult to find equal size comps with the enemy method, Rabbu, AirDNA, Pricelabs, and Awning. That was the best estimate I could find. Actual property comps were difficult to find as well because it is a multi family, but it looks like the house is somewhere in the 450-500k range. That should be plenty to refinance even if I leave a good amount of money in the deal.  

     If it is listed and zoned as a single family, underwriting will want to see the permits to legally change it to multi-family.  Most likely, that is why the appraiser stopped, he saw it had been converted to multi-family, most likely without the proper permits.  Not too many lenders will allow that, if any.  

    Rick Line NMLS #1069991

    Acra Lending NMLS # 144549

    Oh that’s good to know. Thank you for the info! 

    0Reply
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