Why It’s So Difficult to Acquire a Loan for an Airbnb Property?
Despite Airbnb properties potential for producing a sizable income for the investor, there are several reasons that we will touch on below to help you understand why traditional lenders tend to shy away from offering loans for Airbnb properties:
- One of the main reason’s other lenders avoid cash-out Airbnb financing is because they have no reliable resources to draw from that would help them predict the likelihood of a property being successful. For example, they can’t look at vacancy rates, which would give them a better idea of how often a property will product returns.
- Fannie Mae’s limits for rental loans are capped at $417,000. Most traditional lenders don’t go above $624,000 loan amounts.
- You will be hard pressed to find any local or national banks that are excited about the idea of lending you more money on top of a Fannie Mae loan to make up the difference in the amount you need to secure a property.
- Appraisers and underwriters won’t look at short-term rental rates when assessing an Airbnb rental property
- There’s almost no way that the types of homes that are perfect for short-term Airbnb rentals can ever be properly valued. In fact, it’s virtually guaranteed they will be undervalued in terms of their potential for producing a profit and, thus, your ability to pay back the loan.
- Issues with borrower’s proof of income with personal and business tax returns
- Conforming with borrowers current Debt to Income Ratios – (DTI)
- Getting over the self-employed borrower
- Borrower property ownership limits
Obviously, these issues can cause quite the dilemma for a lender and the investor looking to finance Airbnb properties. If any of these conditions sound familiar, give us a call….We are different!
You might be able to label the property as a second-home in order to avoid the rental-home-related scrutiny, but the problem with that is that lenders will then scrutinize whether or not the borrower can afford mortgage payments with their current income (not counting the rental amounts).
On the other hand, if they label the property an Airbnb rental, they’re no longer eligible for a second-home mortgage.
How Does Cash-Out Airbnb Financing Work?
Our approach to cash-out Airbnb financing is much different than the common versions practiced by traditional lenders. So, if you’ve been frustrated in the past because these institutions wouldn’t offer you a loan, we can help.
Instead, we’ll look at the LTV (loan-to-value ratio), which can be as high as 70-75% to qualify.
Our credit requirements are relatively moderate however, we will review your credit scores and do require at least a 600 middle score, if you meet this minimum requirement, we’d love to work with you.
If you’re looking at property that may not offer great cash flow (at least not on paper) or wouldn’t meet the bank required Debt-To-Income (DTI) required for a loan. If you are worried about cash flow issues, we offer interest-only loans, which will help maximize those returns early on.
Aside from the LTV of the Airbnb rental, our team will assess the property condition as well. We simply want to make sure it has been well-maintained over the years. Afterall, pride of ownership makes for a credible source of regular income.
Rental Home Financing provides no-ratio loans, we aren’t interested in your income or the amount of properties you already own, either. In fact, many customers seek us out specifically for blanket loans because they want to significantly increase their real-estate holdings but can’t qualify for a loan because their portfolio is already too big.
That will not be a problem with us.
Choose from 3/1, 5/1, or 7/1 ARM loans with no balloon payment or a 30-year fixed mortgage.
Furthermore, we offer financing to a number of different types of entities, too:
- Family Trusts
So, no matter how you have set up your investment portfolio, our cash-out Airbnb financing is a viable option for expanding your holdings.
Best of all, our Airbnb loan amounts begin at $250,000, but we can offer up to as much as $5,000,000.
If you are looking for lower loan amounts on your investment property, please check out our other rental loan products.
An Example of Our Cash-out Airbnb Financing
For a better understanding of how our underwriting for Airbnb properties work, let’s use common example.
Say you’re interested in purchasing a luxury condo in Fort Lauderdale, Florida that you plan to rent as an Airbnb property and say the purchase price is $1,000,000.
Understanding high-end condominiums are accompanied with high HOA (Homeowners Association) fees and Real Estate Property taxes, it’s often difficult to create positive cash flow using traditional market rental income and bank financing.
While high-end property usually cash flow extremely well on a nightly rental model, using rental amounts of $2,500 or even $3,500 a month typically don’t pencil out well to underwriters.
Rental Home Financing is unique in the market place, we don’t consider historical bookings, proformas, or any other supplied data. Instead, our pricing model is driven by the following circumstances:
- Cash-out – Purchase – Refinance
- LTV - Up to 75%
- Loan Size
- Loan Amount
- Seasoning of Ownership
- Available Terms: 5/1 – 7/1 – 10/1 ARM’s or 30 year fixed rates
As long as these factors check out, you’ll have no problem receiving the financing you need.
Do You Need the Benefits of Cash-Out Airbnb Financing?
If so, Rental Home Financing is here to help.
Unlike traditional lenders, we have experience working with borrowers like you. We understand the short-term rental market and have worked with numerous clients on cash-out Airbnb financing.
Our company also prides itself on providing personalized service throughout the entire loan process – from quote to close.
If you’d like to apply for cash-out Airbnb refinancing or simply learn more about how to apply, please don’t hesitate to contact us today. We look forward to hearing from you.