LENDING OPTIONS BEST SUITED FOR THE STR INVESTOR

[Kelly Olson]

What type of lending product is best suited for STR investing for high income high credit score individuals? I am looking invest in the Smokies looking at both TN & NC sides and also in the Blue Ridge area of North GA.

Thanks!

[Robin Simon]

Quote from @Mitch Davidson:

Hey @Kelly Olson. I agree with @Robin Simon. Conventional financing is always better if your DTI can work. And even if you get to a point where the home will cause your DTI to be a little too high, we can use a rent estimate form from the appraiser and count 75% of the figure to offset most or all of what the property will add to your DTI.

DSCR is a great backup option, but the downsides are (a) if the appraiser's estimate comes in lower than 100% or so of what the property's PITIA will be the deal will likely die, after you've spent quite a bit of money and time, (b) nearly all DSCR programs include a prepayment penalty for the first 3 years, unless you buy it down or out, (c) the rate is higher, and (d) your offers are a little less attractive because the financing type is "other" rather than something more preferred like cash or conventional.

Happy to discuss further if you want to setup a call.

Many DSCR Lenders who specialize in STR can use stuff like AirDNA Projections instead of the appraiser's 1007 - this generally solves the main downside you mentioned since you know upfront qualifying rents and can more likely cash flow as well