Loan on cashflow for flight crew crash pad in a sfh?

Question

In January my partner (a former flight attendant who now works for a major airline in operations) and I (a real estate agent with some investing experience) are opening up our first Crash Pad for flight attendants and pilots in a single family, no HOA neighborhood 3 miles from a major airline hub.  We will have month to month leases and will provide only cold beds (nobody else sleeps in that bed but the tenant who is renting it).  We are almost full now and we haven't even closed on the property yet.  We have been very conservative with our numbers and believe that we will be able to cashflow at least $1400 a month after all expenses as long as we can keep the beds mostly full (rents are 4125 with all beds rented).  We used a bridge loan to fund it and will have to refinance in the next year and we are also looking ahead to our next crash pad as soon as we get into the swing of this one. We will have put $90,000 into the deal including the inspections, down payment (30%), points, closing costs, repairs, advertising, furniture, mattresses, dishes, etc.  My question is, does anyone loan money on cashflow for single family homes? Is there another kind of loan product that would allow us to pull out all $90k so we can have it to reinvest?  Right now there is only about $65000 in equity in the home itself. It is our goal to systematize and scale this to open near major airline hubs around the country for flight crews and traveling nurses.

Don Konipol · Answer

@Angela Vestal

You need to separate your business from your real estate investment.  You are already (I believe) borrowing on the real property via purchase mortgage at the maximum leverage available.  The only other financing you may be able to get is. Business line of credit.  The major banks offer these with the qualification being a combination of personal financial strength and credit score as well as business results.  Since you are just in the initial operating stage of your business￼ you will have to rely on personal financial strength and credit score.  Depending on that a $50,000 credit line should be possible, $100,000 obtainable with more operating history.

Good luck in your venture.  Please understand that it is part investment, part business, so you have to seek financing two ways.

Angela Vestal · Answer

Lol, we didn’t make up the name, it’s not a new idea, just not well known. I’ve heard flight attendants call them “trash pads” before.   They won’t be able to call ours that, though!  Our  business entity name is Crash Here, LLC. (Okay, maybe we’re a little sadistic)  We believe  Crash Here will take off, though!  Look on the Crashpad411 site for some of your research.  There is a need for them.   It’s like an Airbnb for crash pads.   Let me know if you want to know more.  We’ve been discussing how to partner with people in other areas of the country to open them up near the major hubs. Because it’s a little more like an Airbnb, I think it would help to have someone local who can check in.   Before we can do that we want to make sure this one works, though!

Andrew Postell · Answer

@Angela Vestal there are certainly loans that will lend based on the cash flow of a property.

Portfolio - Sometimes referred to as "commercial" loans.  These loans are a lot more flexible than "conventional" loans.  Bank's money = Bank's rules.  If they like you, then maybe they will lend to you.  But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term.  The most common portfolio style loan in Texas is a 20 year adjustable rate loan.  These loans are easier to get but the terms are different.

The best method to find a loan of this nature is to try to have someone refer you to a lender.  So try posting in the North Carolina forum (if that's the state the property is in) or even try networking with some local real estate clubs...some might post on the marketplace here on Bigger Pockets but meetup.com is a good resource of it as well.

Hope this helps!

Michael King · Answer

@Angela Vestal What a great idea! Being a pilot for my W2, I'm a little cautious of the name Crash Pad...but great idea!

I might borrow it to do some research in my area....

Justin Poulsen · Answer

I have run a crashpad for years near O'hare.  Making $1,000 or more on a single apartment is definitely possible.  The trade off is that you are doing more work for the extra cashfow.  You are managing a community on top of managing a building.

The better you set things up and communicate from the beginning the easier it will be to manage the pad.

Good luck!

Shawnya Hallin · Answer

@Angela Vestal

Good day, Angela. My husband used a crash pad in NYC during overnights for trips there.

Keep us in mind when you begin to scale, we’d be interested in investing as we have had a similar idea for expanding the number of crash pads.

Good luck on this one.￼

ps. The crash pad we’re familiar with had a snoring and non-snoring room. ￼￼ I find this a good plan.￼

Angela Vestal · Answer

@Daniel Sager That’s fantastic! Keep me posted on your plans!

Daniel Sager · Answer

@Angela Vestal I recently purchased a 4plex 5 mins from the Anchorage airport and a buddy mentioned this to me as both of his parents were career flight attendants. I just finished rehabbing one of the units (2 bed/1 bath) and was planning on Airbnb for one of the rooms in my unit (3bed/1 bath) but this is something I'll be looking into.

I plan on purchasing another building in 10-11 months as well.

Mark Fries · Answer

@Angela Vestal

What a great, outside the box idea!!! If you want to partner on one in JAX let me know!!

Luke Carl · Answer

@Angela Vestal A conventional loan can do a market rent appraisal and give you 75% of market rent without a lease. If you want to show your actual numbers in your favor you’ll need at least one tax return if not two.

Loan on cashflow for flight crew crash pad in a sfh?

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