Financing for STRs in the Pocono and Catskill mountains

[Justin D' Apolito]

Hey everyone! I have some good deals on short term rentals in the northeast and am looking for financing, both for the mortgage and potentially as capital partner/LP.  If there any investors or lenders out there that would like talk, DM me!

[Brandon Croucier]

Quote from @Justin D' Apolito:

Hey everyone! I have some good deals on short term rentals in the northeast and am looking for financing, both for the mortgage and potentially as capital partner/LP.  If there any investors or lenders out there that would like talk, DM me!

Hey Justin! Happy to connect and see if I can help on the lending side of things

[Robin Simon]

Quote from @Justin D' Apolito:

Hey everyone! I have some good deals on short term rentals in the northeast and am looking for financing, both for the mortgage and potentially as capital partner/LP.  If there any investors or lenders out there that would like talk, DM me!

 Welcome to BP - have you nailed down the specific individual towns/markets for the Poconos yet or are you still casting a wide net?

[Zach Edelman]

Welcome to BP! Plenty of STR friendly lenders here.

[Erik Estrada]

Quote from @Justin D' Apolito:

Hey everyone! I have some good deals on short term rentals in the northeast and am looking for financing, both for the mortgage and potentially as capital partner/LP.  If there any investors or lenders out there that would like talk, DM me!

 Hi Justin,

Happy to connect on the lending side. 

[Stacy Raskin]

There are short term rental (STR) DSCR loans. For purchases, some lenders use the projected rent on AirDNA if the occupancy score is high enough and take a 20% management expense against the gross rents so 80% of the gross rents is used to structure the loan. So for example, if the gross rent on AirDNA is $120,000, the rents to structure the DSCR loan would be $120,000 *80%=$96,000 annually or $96,000/12 (months)= $8,000. The expenses of the mortgage, property taxes & insurance and HOA (if applicable would have to be at or below the number- in this example, $8,000). If it is an short term rental refi, there are some lenders who will use the actual short term rents.

More on DSCR loans in case helpful: DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

On the lending side, happy to discuss further.