What are some good STR loans out there today?

Question

Hi everyone, I'm looking to jump into the STR game since the market has been crazy. I feel the time is good since theirs fear and people are hesitant because of rates not dropping, thus giving me a opportunity to make this move.

I have a few locations in mind I've been doing my research for STR and running possible numbers but now I need to know what loans are out there? What's the best option with low DP then the traditional 20%..

lastly of you have a awesome lender who is creative and can make it happen, please share contact Info.

thanks

Jonathan Taylor · Answer

@Juan Zamora 10% down loans for striclty investment properties (no owner occupancy allowed) are not a reality any more. If you are buying a second home and qualifying conventionally, then a second home purchase can be done with 10% down. But more investors buying STRs are putting 20% down using STR specific DSCR loans assuming the rents can debt cover. These loans can have an interest only period of up to 10 years and the DSC ratio is calculated using the interest payment not the P and I. These loans are what is working in this high rate, low Long term rent environment.

Andrew Steffens · Answer

In FL I have a lender who gets the 10% second home loans done easily.  She also has a portfolio loan at 15% down.  You will not get lower than those options unless you claim it to be a primary residence which would not be ... legal.

Zach Edelman · Answer

DSCR Loans are probably your best bet. With a Second Home Loan, you have to occupy the property at least 180 days out of the year. With DSCR loans, depending on who you can approach, you can get a 20% down loan with AirDNA rental qualification at rates anywhere from the low 7's and low 8's. Also, you are typically allowed 2% from seller concessions from your lender, and potentially even more, which can help with closing costs.

Michael Baum · Answer

I think everyone has covered it pretty well @Juan Zamora.

I like working with portfolio lenders. It can be tough to find one that does DSCR loans.

There are a few lenders on here that specialize in DSCR for STRs. Do a search on the forum and you will find a few folks, plus the BP lender finder.

John Underwood · Answer

My understanding is the 10% down loans have tightened up and are much more difficult to get.

Start with banks you already do business with and local credit unions.

I have used Associated Credit Union and Rocket mortgage.

Joseph Chiofalo · Answer

Hi Juan,

Do you have a property in mind?

If your credit is healthy enough you may get financing available up to 85% loan to value on an STR purchase.

AJ Wong · Answer

STR loan options and programs can make a big bottom line difference in ROI & COC. For my luxury Oregon STR buyers the right loan can make or break the tnvestment. This year we've used a lot of medical lending programs, preferred Jumbo and concessions or buy downs. Check in with @Joseph Chiofalo good contact if you have a portfolio across states and need help on the weekends.

Tanner Lewis · Answer

@Jon Martin I think the guidelines tightened from people using second home loans for STRs. Fannie/Freddie are, in theory, supposed to be used for owner-occupied properties and not investment properties, so they are trying to deter this type of behavior. I think the idea is that a property should not be booked for more than half a year (because you cannot use it when it is booked). They don't expect you to live there for half a year, but it is more of having the ability to.

Jeremy Jareckyj · Answer

I do know some DSCR lenders are now taking STR rents into account. I have seen some between 10-15% DP on a DSCR but most are 20%

Robin Simon · Answer

Sharing this article I published last year here on BiggerPockets on this exact topic - things are generally the same as when this was written up last Fall - your best bet is likely STR-friendly STR Lenders - ones that will use forward-thinking methodologies like AirDNA, etc. - probably about one third of DSCR lenders are STR friendly at this point (most will not do STR or have very conservative UW)Short-Term Rental Loans: What Are the Options and How Do DSCR Loans Stack Up?

https://www.biggerpockets.com/blog/short-term-rental-loans-a...

What are some good STR loans out there today?

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