Private Lender Terms for STRs

[Joseph Sheahan]

Does anyone have any experience with raising private money for STRs? I'm looking for a framework of terms and structure for this scenario. I have found a good amount of info on what that would look like with flips, but not for STRs. Also, does/can this work with only raising part of the money via private money and the rest via a DSCR loan? Thanks in advance!

[Robin Simon]

Quote from @Joseph Sheahan:

Does anyone have any experience with raising private money for STRs? I'm looking for a framework of terms and structure for this scenario. I have found a good amount of info on what that would look like with flips, but not for STRs. Also, does/can this work with only raising part of the money via private money and the rest via a DSCR loan? Thanks in advance!

DSCR Loans are typically great for STR purchases - however, DSCR Lenders are going to require at least some "skin in the game" - so won't be able to have a 2nd lien for the down payment. However - DSCR Loans are "LLC friendly" so can raise that capital through a partnership/LLC format.

This article published here on BP may help - sharing it here:

Short-Term Rental Loans: What Are the Options and How Do DSCR Loans Stack Up?

https://www.biggerpockets.com/blog/short-term-rental-loans-a...

[Zach Edelman]

A good option might be a hard money loan for the front end at high leverage (15, 10, or at most 20% down) and then adding value and pulling out equity via a DSCR cash-out refinances qualified with AirDNA projections.

[Ko Kashiwagi]

Hi Joseph,

You'd have to front at least 15-20% down on the DSCR. You could do a low money down with a short term financing to rehab, then refinance. That way you don't front a lot of cash

[Dustin Lauer]

@Joseph Sheahan

I can speak to the refinance portion: As long as a guarantor with good credit has at least 25% ownership refinancing should be an issue. Short term rentals usually price best 65-70% loan to value but if the cash flow is very strong to support a higher rate up to 80% is still possible these days (not common though).

Best of luck.