Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
Has anyone had any positive results from financing properties to people that own short term rentals? If I financed a property I would want more than the market rent rate or why would I lose my asset and future appreciation? My thoughts were if STR Operators are really tearing it up like they say they are maybe that would be a good fit for them and for me. If I'm dreaming please tell me so. Any thoughts or feedback would be appreciated! :-)
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
5y
I just refinanced 6 properties in th elast 2 months and I can tell you I had a 100 places I could have gone to for funding. If you mean new purchases , OK I get that and you see 20-25% but remember that of LTV. I can get a loan all day long with zero out of pocket depending on the deal I find.
Not trying to dissuade you, just saying its much easier than you think unless you are only going after complete newbies who will agree to anything and pay anything.
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
5y
They will get lower cost financing. Perhaps you can do something like Shark Tank. Guy says "I will lend you XXX amount of money but I want YYY cut of rent until the loan is paid for"
They will get lower cost financing. Perhaps you can do something like Shark Tank. Guy says "I will lend you XXX amount of money but I want YYY cut of rent until the loan is paid for"
You are so right they can get a better loan financing through a bank. Not everyone can get a bank loan though.
There are many types of lenders out there. Traditional banks offer the lowest APR (3-5% right now depending on factors, but usually over 4% for investment properties) but require the most (income qualifications, W2, steady income, etc.). If someone can't qualify, the borrower simply moves to the next tier of lenders who require less, but have higher APR's, maybe 2-4% higher (currently 6-8%). If they can't qualify for those, then they move onto people like you who require the least amount of effort/qualification, but charge up to 10% or more APR. So yes, there will be a few, desperate people who want to take a loan from you at a rate of 10% perhaps, but usually they only do it for a year or so until they can secure a lower rate from a more secure institution.
But keep in mind these people are being rejected from other sources of lower rate's for good reasons. It's incredibly easy to get a 6-8% loan these days for an STR. You just minimally qualify with showing a little data on market rates.
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
5y
@Joe S. Many STR operators are in fact "tearing it up like they say" but that doesn't make them stupid. If you are selling money (and as a lender that is your product) then you need to be like any other competitor in the marketplace and be able to compete for that business. Have better terms, lower interest rate, easier to business with, faster funding, lower fees, etc.
You have to differentiate just like we all do. There are a million places to borrow money from right now and all at low interest rates. If you want to make money lending then figure out your niche. what can you do better, cheaper, faster than the other guy.
Once you figure it out give me a call and I'll borrow from you (maybe).
There are many types of lenders out there. Traditional banks offer the lowest APR (3-5% right now depending on factors, but usually over 4% for investment properties) but require the most (income qualifications, W2, steady income, etc.). If someone can't qualify, the borrower simply moves to the next tier of lenders who require less, but have higher APR's, maybe 2-4% higher (currently 6-8%). If they can't qualify for those, then they move onto people like you who require the least amount of effort/qualification, but charge up to 10% or more APR. So yes, there will be a few, desperate people who want to take a loan from you at a rate of 10% perhaps, but usually they only do it for a year or so until they can secure a lower rate from a more secure institution.
But keep in mind these people are being rejected from other sources of lower rate's for good reasons. It's incredibly easy to get a 6-8% loan these days for an STR. You just minimally qualify with showing a little data on market rates.
Have you personally received funding lately from a traditional lender of any kind? Have you looked to see what kind of down payments they are requiring? I understand that what I suggested it’s not for everybody, but I do believe that it is harder for people to get loans being self-employed than people think. The down payments alone has kept some people from being able to Qualify. Thanks again for the insight.
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
5y
I just refinanced 6 properties in th elast 2 months and I can tell you I had a 100 places I could have gone to for funding. If you mean new purchases , OK I get that and you see 20-25% but remember that of LTV. I can get a loan all day long with zero out of pocket depending on the deal I find.
Not trying to dissuade you, just saying its much easier than you think unless you are only going after complete newbies who will agree to anything and pay anything.
I just refinanced 6 properties in th elast 2 months and I can tell you I had a 100 places I could have gone to for funding. If you mean new purchases , OK I get that and you see 20-25% but remember that of LTV. I can get a loan all day long with zero out of pocket depending on the deal I find.
Not trying to dissuade you, just saying its much easier than you think unless you are only going after complete newbies who will agree to anything and pay anything.
Fair enough. Congratulations for being in such an amazing stage of your career that you can finance whatever you want. That is an amazing accomplishment. :-)
This is not something I would do (pay more for owner financing). You still have the right to foreclose if they don't make mortgage payments. They are taking the all the risk with property improvements as well as the risk of depreciation. So the real question is why would anyone agree to pay more if they are able to get traditional financing?
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
5y
@Joe S.
I just signed 10% down at 2.75% yesterday there is no say you can beat that.
What kind of properties are you looking to sell exactly? I find it hard to believe that anyone has properties laying around that they'd rather owner finance to an STR operator than do whatever the property was already doing.
Am I not understanding something or does this thread make no sense?
I just signed 10% down at 2.75% yesterday there is no say you can beat that.
What kind of properties are you looking to sell exactly? I find it hard to believe that anyone has properties laying around that they'd rather owner finance to an STR operator than do whatever the property was already doing.
Am I not understanding something or does this thread make no sense?
If it is as easy to get a loan as you and the other posters have pointed out then I really do not see a market for what I was thinking of. I did not realize people could put down as little as 10% on investment loans and get that kind of interest rate.
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
5y
I do ageee that most people doing this can get a regular loan.
However I do their could be people who would jump at this that might not have perfect credit and are younger and more inexperienced.
That would be why you could charge a higher interest rate because this would be a higher risk to you.
If you vet the person and vet the property than I could see a market for this. Like any higher risk investment you have to be prepared to take the property back through foreclosure.
One group of people that might be interested would be anyone left doing arbitrage.