LLPAs for Vacation Home Loans

[Jonathan Snider]

I have been saving up for a while to purchase my first STR. I did some rough calculations and figured I should be ready to purchase in the first half of 2025. I had a meeting with a lender about getting a second home loan. He told me about LLPAs and presented me with a lot of option related to them. The way I understand it, I would have to pay 4.125% of the purchase price in LLPAs if I want to get the normal interest rates. If I don't to that, then my interest rate goes up.

This is completely new to me, and it's a bit of a bummer since that would delay me getting my first STR that I have been saving up to get for a long time. What is the best path forward?

1. Don't pay LLPAs and take the high interest rate?

2. Save up long enough to pay the LLPAs to get a better interest rate

3. Something between #1 and #2

I know the answer is probably something like "however the numbers work best", but I'm looking for general guidance. How have you handled this situation?

[Andrew Steffens]

Rates are set to go down, although not as fast as hoped.  I would buy a deal that at least minimally cashflows (they exist) and then plan to refi in the 18-36 month window.