Creative financing for STR?

[Julie McCoy]

Hey all! I have a relatively unique financial position and am interested in sourcing financing for my next STR - I'd love your input/experiences with different possibilities.

Thumbnail of my situation: I'm a professional in the film/television industry, which by its nature consists of short- to medium-term employment. I recently finished working on a TV show, and am now unemployed until I get my next gig (which I'm not in a big hurry to do, since full-time employment means 70-80 hours/week). I rent my residence and have one mortgage on an investment property (STR), and I have a good amount of cash on hand.

I want to dive into my next STR investment, but given that I don't currently have W2 income, I don't believe I'll qualify for a conventional loan. My current STR grosses between $3-4k/mo, and for the time being unemployment will yield $1800/mo. I have excellent credit and my debt-to-income ratio is currently acceptable; when I'm employed it's excellent.

Any thoughts on how I could secure low-interest financing for my next STR? I'm looking at homes with established histories as profitable STRs, with a purchase price between $200-250k. Are there good financing options for me or should I just wait until I'm employed again before I purchase, and get a good ol' conforming loan? Thanks in advance for your input!

[Nghi Le]

You can use a commercial or hard money loan for long-term financing too. I've seen rates between 5% - 7% on those. They still care about DSCR like a normal long-term rental. However, some of them don't require a lease in place and can use market rents.

Even if you are using the property for STR, you should always have a back-up, and a good one to fall back on is to turn it into a long-term rental that will cashflow.