Airbnb Funds Allocation Help

[Ben Unger]

Hello BP,

I am having trouble setting up my buyer criteria. I have a target market of Galveston, Tx or Surfside, Tx and want to purchase my 1st Airbnb.

My available funds are about $50k savings and $100k HELOC from personal residence. I do have other rainy funds that would get me through a year of expenses. (Layoff, or other unforseen events) and my credit is great.

What realistic purchase price point I should be evaluating? And what should be used from the HELOC vs savings. ( Furnishings, down payment %, rehab, ect.)

I hesitate with the HELOC as home prices are falling and rates are going up. Not sure what adjustable interest rate I should consider for analysis? and best moderate risk way of paying it back.

Any help from examples of funding Airbnbs with combination of Savings and HELOC would be appreciated. Assumptions, risks, payback strategy.

[Karl McGarvey]

Quote from @Ben Unger:

@Karl McGarvey I see the barrier to entry is quite high now. It makes sense for lenders to request proof of STR revenue. I have a HELOC with Penn Fed and need to see what they would require. Also, I'm not sure what would be a conservative rate estimate to use for analysis using HELOC funds as portion of down payment given the consecutive rise in prime rates. I certainly hope my HELOC cap rate of 18% would not be reached!

High cost of entry is going to remain for anything STR for a bit. Even with prices dropping, 25% of any amount for beach property is going to be a chunk. You can always try hard money and forcing appreciation into something for a cash-out refi, just a lot more work (however timing for it is great in terms of having a property ready to go for next year).