STR Financing - Business Plan

3 Replies

Has anyone put together a killer business plan and presented it to a lender for a potential purchase of a home for the purpose of STR and been approved?

What was included in the plan?

@Chris Politylo In general I believe most STR owners go the traditional financing route to which they are usually going to have to show previous schedule E/C tax returns to prove monthly revenue to apply as additional income when qualifying.

I personally had to persuade underwriter on my most recent acquisition to use my income history from a previous STR home I had already liquidated to prove that using my same business model (and in the same area) would produce the same results..which they fortunately agreed to in the end.

That being said, I certainly can see value in generating such a business plan if you want to look for alternative lending for your STR's. I would also say that document could be valuable if you hit roadblocks with traditional lenders as well.

If I were draft such a document it would probably include some of the following: 

> Previous historical STR business success/numbers (or other relevant REI experience)

> Exit plans for property if they were restrict STR's and ability to liquidate or convert to standard rental

> Revenue and Occupancy rate projections using industry 'approved' sites like Airdna.co

>Cash flow projects with proof of expense amounts citing publicly available data 

In the end, the lender wants something predictable as a lease would give them on a standard rental purchase. Since STR's are not as predictable you have to come in with as much supporting evidence as you can that will create 'predictable' results for them.

Best of luck! 

If the home has never been a short term rental before, most lenders will not use the potential revenue as a basis for lending.

If the home has a track record (verifiable) and is a currently operating STR, you can make that work.

It will all depend on the lender. I found that using a local lender made things easier. Our home was never a STR so we didn't use the possible revenue, so we relied on our income to cover it.

We are in our second year and it is now cash flowing, so if I refi the property, I can use the revenue.

Also, expect that your first year with most likely be a little short if not way short of cash flowing. People like reviews and what other travelers have to say. Once you get some 5 star reviews, things will do much better.

One of my properties was investment property 20% down and the other was commercial 25% down. Local banks

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