All Forum Posts by: Zach Edelman

@Brian Rocha -

Something to note is lenders will oftentimes slightly limit leverage on the purchase of a hard money loan or a "fix and flip" loan if you are doing borrower funded rehab. Limiting leverage, for any loan ever = reducing lender exposure/risk. So, the common person may ask - well how is me funding the rehab myself any more risky for the lender/why would they want to limit leverage? The answer is that if the lender that's doing the hard money loan is only funding the purchase and not the rehab, they then have less oversight of the project since they're not doing the draws, and thus not seeing the progress of the project and having control of the funds or draws from the rehab to make sure the project is progressing. I know for example we can fund up to 90% of the purchase and 100% of the rehab when we're funding the purchase and the rehab. If we're funding just the purchase, we fund up to 82.5% of the purchase price. Hope this helps!

You want to find a lender for this that specializes in STR financing!

I am doing a Joshua Tree closing right now and the future bookings were negotiated into the contract! 

You could also go DSCR if you're DTI does not qualify for a conventional loan and you'd still be at 20% down on DSCR. You can also partner up as well/have multiple people on the loan for down payment purposes!

Hello Will! I’m located in West Village and am serious about investing and connecting! Please reach out!

Unfortunately - there are a couple of issues here that likely make this hard to finance:

-"Cabin style" dwellings typically are difficult to finance as the secondary capital markets treats these differently than standard single family homes as the buyer pool for a "cabin" dwelling is less than that of a standard home.

- Yurts: Lenders typically have difficulty financing Yurts as they are moveable collateral. Lenders want collateral that can't be picked up and moved overnight. Let's say they need to foreclose and the borrower picks up the Yurt and moves it - now the entire loan they underwrote is thrown out, along with title insurance, and the lien on that property.

- Value: A SFR, or 2-4 unit (what it would be in this case) are residential assets and thus are valued off the "sales comparision approach" rather than the income approach. An appraiser likely won't be able to value a 1-4 unit property based off STR rents (whether projected or actually incurred), and if they are, the lender won't lend off said valuation for their applicable value (value they're lending off of).

With all this said, to answer your question of how you'd value this for a sale, I'd get a STR specific broker that's able to market your property as a turnkey STR with data on the rents, figures, etc. An ATX friendly STR realtor that I reccomend is CRIBS Consulting. They do property management for STRs and are a brokerage. Here is their website: https://www.cribsconsulting.com/

Welcome to BP fellow NYC resident!

Unfortunately, STRs as single family homes are still considered residential assets. Thus, they are appraised as such - valued based off the sales comp approach - i.e how much have other similar single family homes sold for? Not how much can this property earn as an Any DSCR lender is going to go to lend off the income approach. One of the main reasons for this is let's say the lender were to lend off a value that is tethered to how much the property can earn as an STR, and they're at 80% LTV let's say. Ok, well now STRs are regulated in that city, and that same income approached value plummets since the home can only be rented as an LTR. The lender is now overexposed (perhaps at over 100% LTV) which is a position no lender wants to be in for obvious reasons. It's a tough part of STRs that some investors struggle to understand, but lending off residential assets based off how much the home can earn as an STR is far too risky.

Are you planning to occupy the property as a 2nd home or as a true vacation home? The lending options will differ based on this: For 2nd home, 10% down is available, but there are restrictions regarding how much/long you can occupy the property. For investment, 20% down is typical with some 15% down options out there but there are restrictions (not sure if this is available for STRs, just LTRs.) 

Thomas -

Please DM me. As an STR focused lender, I have a great network for you for this.