STR mortgage options?

Question

Howdy BP friends! For those that play in the short term rental space, have any of you utilized the 10% down mortgage for your property? If so, what bank did you use? Wondering if there are any particular banks that excel with this offering.

Cheers,

Rick

Cheers,

Rick

Michael Baum · Answer

Hey @Richard Lovering, I would take a look at that setup closely. HOA fees, resort fees, possible management fees and restrictions can turn that kind of place into a nightmare.

Here is an article that covers condo hotel units:

https://www.condohotelcenter.c...

On downpayments, condo resort/hotels they say is 20 percent. Sometimes more. I am sure it will depend on the lender.

Luke Carl · Answer

Any lender, broker, or bank can do 10% down conventional on a second home. Very common practice.

Michael Heisterkamp · Answer

@Richard Lovering another point to consider is that the high HOA fees will put a tight clamp on appreciation.  If you look into the past sales history of the unit I wouldn't be surprised if you found out it sold for around 100K many times.  High fees seriously limit the properties ability to appreciate.  But the rents should be able to climb, I would write up a contract and see if you can get the HOA rep to sign that the fees will never rise and make sure the contract is transferable.  This will add some value to the property.

Richard Lovering · Answer

Thanks Michael. Great info! I know that this particular complex (in a ski resort in VT) allows STR. The seller actually has 3 units she's selling and has provided her rental info and is also willing to pass along previous renters info. Ironically the real estate agent I'm working with also lives in the complex. The seasonal variance won't be a huge issues (except for mud season) as I have friends and know folks that rent their properties almost year round in this town.

It's a smaller unit (2 bd, 2bth, 900 sq ft) garden style condo in a resort/sports club. The thing that's thrown me off on this unit is the high HOA fee. It's $1100 per month, but includes cable/internet and access to all sporting facilities (8 tennis courts, 3 pools, weight rooms and free classes). At 100k for the unit the HOA fee represents a LARGE portion of the monthly expense. I am still running cashflow around $400 per month, but that HOA will never go away. Heading up to visit the property next Wednesday so I'll have a better idea once I see it in person.

Thanks for the advice!

Rick

Michael Heisterkamp · Answer

@Richard Lovering First thing to check is the condo boards guidelines to see if you can do STRs at all.  Second is if you can look for others in your area doing STRs and ask them for roughly what you can expect in terms of revenues, vacancies, etc. also be sure you ask about seasonal varainces.  These are one of the biggest problem points for new investors in the area.  Then check into property management, cleaning services, etc.  Insurance is another big one to look into.  Once you have all of these things in place then financing is something to consider.  I would say 20% down is a safe target for lending on this kind of property.

Once you have acquired the property pay for professional stagings and pictures.  These can make a difference in tens to hundreds of dollars per night.

Richard Lovering · Answer

thanks Michael!

Richard Lovering · Answer

Does a Condo have any impact on this? Seriously considering a Condo that's part of a "resort" and wondering what the money down will be?

Matt Castle · Answer

Some lenders have loosened standards a bit about STR loans... they require 10-20% down, a credit score and use proven STR income to qualify the borrower. That's about it. I haven't done it personally but it seems more like an old school asset based loan.

Richard Lovering · Answer

Thanks Lucas. I didn't realize it was a common practice. Good to know!

STR mortgage options?

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