STR Financing- Who has used Host Financial?

[Luke Harris]

Does anyone here have experience using Host Financial to finance a Short Term Rental? I would love to pick your brain about that for a few minutes! Thanks

[Daniel Christopher]

Quote from @Alex S.:

I was also looking into Host Financial.  Their rates are significantly higher, but I could see their value in certain limited scenarios.  

An example:

I bought a "turn-key" 4-plex that was being rented long-term for below market rates. It was in good condition, but nothing special and definitely not STR-quality. I put about $4,500 into each unit and turned them into STRs. It now makes double the income as before, but for conventional financing (based on comps)...it is worth pretty much the same that I paid for it. An appraisal based on the income it produces is about double (~$300K more).

I've never exercised this option, but my main concern is this: I now have $560K of debt on a property that is only worth $380K by normal (non-STR) metrics. That should give you pause as an investor.

Alex, just to clarify here, these types of loans (DSCR Loans) are qualified using the properties actual or projected income, and in the case of Host Financial - short term rental income. The STR income is not used in valuing the property as these residential properties are not valued the same a commercial property (Cap rate valuation). Essentially the underwriting component is similar to a commercial underwrite (DSCR) and the value of the property is still based on sales comps. The reason being is no lender will base a residential property on income due to the fact that in the case of a default/foreclosure, the market for selling off this type of asset to clear off the debt are primarily traditional home buyers and a small minority of home buyers would be looking to purchase the property as an STR and thus value it as such.