Advice/feasibility of financing first STR investment

Advice/feasibility of financing first STR investment

Member since 2023 · 1 post · 1 vote

Hello, first-time poster / potential new investor—apologies for my total lack of knowledge and experience. I'm wondering if it's possible to find financing as a first-time buyer to purchase two adjoining properties that are currently successful STRs, using one home as a primary residence while continuing to rent the other as an STR. To put it in specifics, $800k total purchase, each property produces about $67k/yr according to Awning data. I've got about $120k liquid assets. I don't have the provable income to do this as a traditional mortgage, but is it possible to find a lender for this based on the previous renters track record? What kind of financing am I looking for? Or am I barking up the wrong tree? Thanks!

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

It is a tough question @Jon Dieringer.

I want you to ask yourself if you are really ready to afford this venture.

Whatever an existing STR is pulling in right now is not indicative of future success. Most of it depends on the owner and how they manage it. STRs are a hospitality industry so you need to be at the top of your game.

One issue is that you will be relying on a single place to cover the nut so the DSCR lender will need to look at that. 800k for 67k a year isn't going to cashflow.

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  • Lender · Member since 2023 · 112 posts · 35 votes
    3y
    Quote from @Jon Dieringer:

    Hello, first-time poster / potential new investor—apologies for my total lack of knowledge and experience. I'm wondering if it's possible to find financing as a first-time buyer to purchase two adjoining properties that are currently successful STRs, using one home as a primary residence while continuing to rent the other as an STR. To put it in specifics, $800k total purchase, each property produces about $67k/yr according to Awning data. I've got about $120k liquid assets. I don't have the provable income to do this as a traditional mortgage, but is it possible to find a lender for this based on the previous renters track record? What kind of financing am I looking for? Or am I barking up the wrong tree? Thanks!

    Hey Jon,

    I have seen lenders use STR data from a previous owner to qualify for income on a DSCR loan.

    You may still qualify for primary mortgage loans even with a low DTI. They would just require a larger down payment and proof of funds.

    Let’s connect.

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

    It is a tough question @Jon Dieringer.

    I want you to ask yourself if you are really ready to afford this venture.

    Whatever an existing STR is pulling in right now is not indicative of future success. Most of it depends on the owner and how they manage it. STRs are a hospitality industry so you need to be at the top of your game.

    One issue is that you will be relying on a single place to cover the nut so the DSCR lender will need to look at that. 800k for 67k a year isn't going to cashflow.

  • Lender · Member since 2023 · 52 posts · 18 votes
    3y

    I think a local bank may be able to provide you a commercial loan. Most banks will won’t to see the actual rent history and that you have experience as a landlord which could be challenging for your situation.  

    Private lending may also be an option as these lenders often have more flexibility. 

    Feel free to reach out via PM to discuss more. 

  • Member since 2022 · 1k+ posts · 1k+ votes
    3y

    I've spoken with lenders doing Fannie Mae loans and they can use local LTR rents as income without it affecting your DTI. However, not sure how that break down with a split use property like you are mentioning, at which point your income would likely be an important factor. Call around.

  • Investor · La Palma, CA · Member since 2021 · 71 posts · 19 votes
    3y

    Hey Jon, if you need help finding DSCR loan or seeing if your deal will get approved, I'm an affiliate partner with a big investor friendly capital company.

    Enter you deal info and they'll help you see if it will work out or not.

    Triple8.alphagatorfunding.com

  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y
    Quote from @Michael Baum:

    It is a tough question @Jon Dieringer.

    I want you to ask yourself if you are really ready to afford this venture.

    Whatever an existing STR is pulling in right now is not indicative of future success. Most of it depends on the owner and how they manage it. STRs are a hospitality industry so you need to be at the top of your game.

    One issue is that you will be relying on a single place to cover the nut so the DSCR lender will need to look at that. 800k for 67k a year isn't going to cashflow.


     You also need Net numbers from the owner not Gross numbers.

  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    3y

    Check out The Lender, they might be able to help you with this situation or point you in the right direction. 

  • Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes
    3y

    Visio is a good STR lender and they will use AirDNA numbers and also won't ask you for taxes, or income. They are a DSCR lender. I have used them for 4 of my STR's and really great.

  • Investor · Minneapolis · Member since 2023 · 265 posts · 162 votes
    2y

    Check out my friend Kyle and KTRloans.com  He can give you some advice for sure.

  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    This sounds feasible but will be pricier than a traditional mortgage. Either you will need to put more down due to lack of income or will need to use a DSCR lender

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