STR Non-QM interest rates too high.

[Jesse Goldstein]

Hello all.

I am working on refinancing out of a BRRR-STR property I purchased in an LLC since we have multiple owners. Our mortgage broker just quoted us a 6.75% rate on a 30-yr fixed 75% LTV loan. He initially quoted me 5.5% (same terms) for a long term rental but said we were not eligible given our STR goals. QUESTION: is there a way to enter into a long term lease with a separate entity (or one of the partners in our LLC) to meet this lender's criteria who can then use the property as an STR?

I generally hate to complicate things, but the interest rate difference is significant, and a long term lease might also help support our appraisal value. I have an email out to my real-estate attorney but wanted to hear what you all had to say as well.

[Jeff Langley]

Quote from @Stephanie P.:

Quote from @Jeff Langley:

With that high of a rate jump, I'd legally find someone to sign a 6-12 month lease to satisfy the lender if the DSCR ratio is strong enough and then turn it into an STR. I've also never had a lender actually verify my leases on DSCR loans. I know they can, but no one has.

 How is a bogus lease legal?  Some lenders are requiring proof of receipt of the payments.

@Jesse Goldstein There are lenders out there that will do STR. You just need to use one of those and go with the current market rate. We were in the 4's in February. Unfortunately, as many have written in this thread and others, that's history. Rates on those are in the 6's and 7's now and going higher as the Fed continues to move north. Hopefully the numbers will work at the higher rate.

It wouldn’t be a bogus lease. Sign a legit 6-12 “long term” lease and then turn it into a STR once the lease is over.