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Rahul Gupta
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Short term rental Hard Money Loans

Rahul Gupta
Posted Apr 15 2024, 06:56

Good Morning!

I was wondering if anyone here had successfully used a hard money loan to finance an STR? If so, is there someone you recommend that services Twin Cities, Minnesota?

Also, please tell me if If there is a reason I should avoid them or if there is something better that I don't know about. I am looking at purchasing a turnkey property with a 30 year rental program.

Thank you so much!

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John O'Leary
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John O'Leary
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Replied Apr 15 2024, 07:26

Hello Rahul,

When it comes to DSCR loans for STRs, there's a variety of options available. It's crucial to discuss how each lender evaluates income and experience, as their criteria can differ. For instance, some may require prior experience in operating STRs, while others may be open to first-time operators. Additionally, lenders may consider various factors such as past income statements from the subject property or income statements from similar properties nearby, managed by professionals. It's all about finding the right fit for your circumstances. You can explore numerous reputable lenders under the "Find a Lender" tab here on BP. Best of luck!

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Andrew Steffens
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Andrew Steffens
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Replied Apr 15 2024, 08:26

I have used hard money as a sort of bridge to longer financing, for example to fix a place up and stabilize it then move to a 30 year fixed product, whether that be conventional or DSCR.

I do not think hard money is a good long term option as it is expensive, and STR's are long term investments in my eyes.

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Devin Peterson
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Replied Apr 15 2024, 09:11
Quote from @Rahul Gupta:

Good Morning!

I was wondering if anyone here had successfully used a hard money loan to finance an STR? If so, is there someone you recommend that services Twin Cities, Minnesota?

Also, please tell me if If there is a reason I should avoid them or if there is something better that I don't know about. I am looking at purchasing a turnkey property with a 30 year rental program.

Thank you so much!


Is there a specific reason you are asking about hard money loans for a property that could be stabilized with a DSCR loan? Do you intend to make any renovations?

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Rahul Gupta
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Rahul Gupta
Replied Apr 15 2024, 10:41
Quote from @Devin Peterson:
Quote from @Rahul Gupta:

Good Morning!

I was wondering if anyone here had successfully used a hard money loan to finance an STR? If so, is there someone you recommend that services Twin Cities, Minnesota?

Also, please tell me if If there is a reason I should avoid them or if there is something better that I don't know about. I am looking at purchasing a turnkey property with a 30 year rental program.

Thank you so much!


Is there a specific reason you are asking about hard money loans for a property that could be stabilized with a DSCR loan? Do you intend to make any renovations?


Hello,

I just spoke to a hard money lender and it seems to be doable.

In my experience, Banks make it really difficult to obtain a mortgage and I have never been able to succeed in obtaining a loan with them for investment purposes simply because they require a certain amount of DTI ratios. For example, I have been informed from a couple of banks that even though my current Airbnb totally offsets the mortgage, they will not take the income from the property towards the DTI calculations but rather take the gross income from the Taxes filed and consider the mortgage amount as an expense, which was hard to understand. Now, I am not sure if the banks I have dealt with have just made it complicated to explain to new comers or I did not understand (after repeatedly trying to understand their process) it completely, but it seems too complicated. By then they run the credit and there is a hard pull on the credit report making my fico score drop and then them saying "sorry" the next day. All this after talking to the loan officer about every single detail before applying and them saying that there will be no problem with the loan.

I feel Hard money lenders are more logic based and rational people. Yes, they can run a soft pull to pre approve it does not hurt the credit at the initial stages for no reason. Also, they can let me know if the deal will be a go or not before they want to hurt my credit score. 

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Michael Baum
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Michael Baum
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Replied Apr 15 2024, 12:24

Hey @Rahul Gupta, yeah you are dealing with the wrong lenders. Major banks are really not for our kinda jam.

You will need to find a specific investor centric lender.

Hard money, like @Andrew Steffens said is for temporary funds to buy, fix then refinance. It is not a solution for long term. I have never seen a hard money lender have great interest rates and low points.

You have to take a hard look at yourself. Your economic situation. You might just not be in the position to buy another property. You might need to tighten the belt and save up a larger down.

Payoff as much outstanding debt to get the DTI down.

You need to look for a good portfolio lender who can do a DSCR loan for you. Maybe talk to the 2 lenders who just posted and get their opinions. There are a lot of resources here to help.

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Jason Park
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Jason Park
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Replied Apr 15 2024, 12:51
Quote from @Rahul Gupta:
Quote from @Devin Peterson:
Quote from @Rahul Gupta:

Good Morning!

I was wondering if anyone here had successfully used a hard money loan to finance an STR? If so, is there someone you recommend that services Twin Cities, Minnesota?

Also, please tell me if If there is a reason I should avoid them or if there is something better that I don't know about. I am looking at purchasing a turnkey property with a 30 year rental program.

Thank you so much!


Is there a specific reason you are asking about hard money loans for a property that could be stabilized with a DSCR loan? Do you intend to make any renovations?


Hello,

I just spoke to a hard money lender and it seems to be doable.

In my experience, Banks make it really difficult to obtain a mortgage and I have never been able to succeed in obtaining a loan with them for investment purposes simply because they require a certain amount of DTI ratios. For example, I have been informed from a couple of banks that even though my current Airbnb totally offsets the mortgage, they will not take the income from the property towards the DTI calculations but rather take the gross income from the Taxes filed and consider the mortgage amount as an expense, which was hard to understand. Now, I am not sure if the banks I have dealt with have just made it complicated to explain to new comers or I did not understand (after repeatedly trying to understand their process) it completely, but it seems too complicated. By then they run the credit and there is a hard pull on the credit report making my fico score drop and then them saying "sorry" the next day. All this after talking to the loan officer about every single detail before applying and them saying that there will be no problem with the loan.

I feel Hard money lenders are more logic based and rational people. Yes, they can run a soft pull to pre approve it does not hurt the credit at the initial stages for no reason. Also, they can let me know if the deal will be a go or not before they want to hurt my credit score. 


 Hey Rahul, 

I ran into the same issue through conventional as I was starting.. It seems like you already have the answers, there are great DSCR lenders on this platform. Let me know if I can assist you in any way!

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Ko Kashiwagi
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Ko Kashiwagi
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Replied Apr 15 2024, 13:13

Hi Rahul,

Is your plan here to get a short-term hard money financing, then refinance out to a 30 year fixed? A lot of lenders should be able to do this, but local banks who only offer conventional financing usually cannot do this.

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David Pearl
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David Pearl
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Replied Apr 15 2024, 14:55
Quote from @Rahul Gupta:

Good Morning!

I was wondering if anyone here had successfully used a hard money loan to finance an STR? If so, is there someone you recommend that services Twin Cities, Minnesota?

Also, please tell me if If there is a reason I should avoid them or if there is something better that I don't know about. I am looking at purchasing a turnkey property with a 30 year rental program.

Thank you so much!

 @Rahul Gupta - This is something we would be happy to assist you with. No personal income, tax returns or DTI to worry about. I also own AirBnB's myself. Happy to help.

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Zach Edelman
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Zach Edelman
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Replied Apr 18 2024, 13:20

When you reference "Hard Money" are you referring to a fix and flip or bridge loan, or just non-QM? DSCR for STRs is commonly mislabeled under the "hard money" umbrella, when it's in fact a 30 yr fixed, fully amortizing loan (same structure as Conventional), with rates similar to conventional.

Also, is this acquisition a turnkey property, or one that needs work? If it's turnkey, and all your worried about is DTI, there are other good options for you other than "Hard Money" loans.

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Mike Klarman
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Mike Klarman
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Replied Apr 22 2024, 07:12

I provide STR funding. I just got a 740k refi closed for a rural STR property.