Rental Property Investor · Boston, MA · Member since 2020 · 4 posts · 0 votes
Looking at a 4-unit property in Old Orchard Beach, ME (2x 2BRs + 2x studios). Asking $975k. Broker pro forma shows ~$141k gross, $44k expenses, NOI ~$96k. My financing (25% down via HELOC @ 7% + mortgage @ 6.75%) would leave ~$22k annual cash flow (9% CoC). But stress test shows the deal turns negative fast if summer slips below 10 weeks or winter leases don't cover the 9 months. Would love BP thoughts on whether these assumptions are realistic in OOB, and how folks here hedge against occupancy + regulatory risk.
Lender · Los Angeles, CA · Member since 2020 · 65 posts · 15 votes
1y
Hi Jonathan, From a financing standpoint, if you want to protect against volatility, you might explore DSCR loan products that underwrite directly to STR income (not long-term rents) so you're not forced into overly conservative "annual lease" numbers. Depending on structure, it could give you better leverage or flexibility than the HELOC + conventional stack.
Lender · Los Angeles, CA · Member since 2020 · 65 posts · 15 votes
1y
On the lending side, here’s what I’d look at:
Coverage: Your current numbers put you around a 1.3 DSCR, which is fine, but it doesn't take much of a dip in occupancy before that gets tight. Most lenders (myself included) like to see a buffer built in.
Seasonality: Some investors hedge by filling the off-season with 3–6 month corporate or travel nurse leases. If you can document those, lenders will usually count that income.
Regulations: OOB has been cracking down on STR licensing. Make sure all four units can legally transfer permits—otherwise you might find yourself holding a "fourplex" that only pencils as a duplex.
Cash reserves: I’d plan on holding enough reserves to float one full off-season of debt service. That way if bookings soften, you’re not stressed.
If you want to compare financing structures, there are DSCR products designed specifically for STRs. They underwrite on actual short-term rental income instead of long-term lease numbers, which could give you a little more flexibility than stacking a HELOC + conventional loan.