AirBNB rental financing

16 Replies

Any AirBNB folks in here,

How do you qualify for mortgages on a second/vacation rental? For my next purchase I wanted to buy a place I could use as an AirBNB. Looking around I found this place I loved but it is fairly expensive. Getting my ducks in a row here for financing will the lender look at my total DTI ratio and not allow me to use any of the future income of the property to qualify? Or will they look at the property strictly as an investment?

-It was not used a vacation rental or income property so there is no history to show.

-If I bought the home strictly as a second home (at least for the banks purposes) I'm not sure I could qualify at least not without a much larger down payment.

I would like to do somewhat of a hybrid where I purchase this place use it a little for myself accept the lower ROI but the rental pays for it at least to a large extent and even help me qualify for financing so I don't have to make such a large down payment. But not sure the banker will go for hybrid plan! LOL

Thank you for reading,

The easiest way is to have a good DTI ratio and down payment so that you don't need to worry about including vacation rental income from a property you don't own yet.

Should be no problem just call 10 banks. First question I would ask is “how many vacation home loans do you do per year” 

All depends on the lender. Some local lenders I've found will go as little as 15% down while using STR projected income and there are also national lenders like Host Financial and Visio Lending if you can put 20 or 25% down. These are for investment loans though, so your rate will be at least a percentage point higher in my experience.

I don’t know of a lender that will allow you to use projected rental income if doing a second home/vacation loan. Pretty sure Fannie or Freddie wouldn’t buy that loan if they did, but I could be wrong. Just none of the 20+ lenders I’ve ever spoken with would do that. Let me know if you find one and I’ll be calling them same day!

@Eric Bilderback

I agree with Josh. Some STR specific lenders don't use DTI, but you're looking at higher DP. If you want to do a traditional second home and get the 10% DP, it seems like you need a good DTI. My first property purchased as a second home was based on no projected income and my own ability to afford a 2nd home.

Now that my properties have rental income on my tax return, future loans are a bit easier and they do often consider the STR income on. Y schedule E.

@Joseph Bafia , @John Underwood

Im okay with 20-30% down.  But I don't want to do 50% down, although I probably would if I had to.  I just want to get the place.  But it seems silly to get a nicer vacation home then your real home.  But I can justify it because I know I can get quite a bit AirBNBing it.  The rub I think my be does the banker share my vision?  You feeling me?  LOL  

I will update this after calling the bankers especially if I can get it.  I believe the bankers will say in order to get this loan it needs to be either;


A- It cashflows as an investment or

B- You need to be able to finance the whole property on your DTI

I don't think they will say if you rent it out 2 weeks a month that should cover it but you can come out of pocket for anything that the income doesn't cover that month.  Or am I wrong?  I will find out soon enough but am excited to see if I can make this happen.

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Originally posted by @Eric Bilderback :

Any AirBNB folks in here,

How do you qualify for mortgages on a second/vacation rental? For my next purchase I wanted to buy a place I could use as an AirBNB. Looking around I found this place I loved but it is fairly expensive. Getting my ducks in a row here for financing will the lender look at my total DTI ratio and not allow me to use any of the future income of the property to qualify? Or will they look at the property strictly as an investment?

-It was not used a vacation rental or income property so there is no history to show.

-If I bought the home strictly as a second home (at least for the banks purposes) I'm not sure I could qualify at least not without a much larger down payment.

I would like to do somewhat of a hybrid where I purchase this place use it a little for myself accept the lower ROI but the rental pays for it at least to a large extent and even help me qualify for financing so I don't have to make such a large down payment. But not sure the banker will go for hybrid plan! LOL

Thank you for reading,

 Also you keep saying Airbnb. If you have a true vacation rental then advertise on Vrbo too.

For me Vrbo beets the pants off Airbnb. 90% of my bookings come from Vrbo, this could be market variable too.

@Eric Bilderback

It will only be seen and qualify once you have filed your taxes and the schedule E is part of those. So for example, I finished up 2020 taxes and filled out a schedule E which shows STR income. I can now take to my bank and they "count" this revenue.

I strongly recommend an accountant who knows REI since my taxes got messed up as my schedule we was not filled out correctly in 2019 so I had to amend my return.

I second what @Joseph Bafia said. I did the same thing and the lender would count my STR income once it was filed on my tax return. Helps offset DTI so you can qualify for another second home loan with cheaper rates and less down.

I also have one long term rental in addition to STRs and that income is counted as well. It does all depend on the bank. I'd always compare multiple ones until you get what you're looking for. I probably called 15-20 lenders to get the terms I was looking for on my newest STR in FL.

@Eric Bilderback in my experience banks don’t take Airbnb income future or present for residential loans. Its too sporadic and they do not consider it solid. You’ll need to have some regular long term rental income to show or a w2. Im seeing options on this thread out there though be careful. Also you cannot refi using Airbnb income in my experience. I understand why banks don’t want to lend for it, it is high risk compared to long term rental. If anyone on this thread knows specific lenders who fairly lend for str’s please share it has not been my experience I would love to learn how to do this. The more specific the better as what lender is doing this. Thanks @Eric Bilderback great question

My bank guy told me that I can buy it.  What they do is run it as if you were renting it month to month.  If you can pass the underwriting test that way you can buy the property in.

So alls well that end well,