looking to purchase a STR but need a lender that will finance

[Scott Mackinnon]

I`m selling a 31 unit apartment bldg. and looking to do a 1031 exchange and have been looking at investing in STR but can`t find a lender that will let you use the short term rental income to qualify. The banks I`ve talked to want to see a long term lease agreement to be able to use the income. The property I`m interested in is at the beach and would be the perfect property for a STR. It has 3 single family homes on 1 lot.

I guess I could always buy it with long term leases in place and turn it into a short term rental afterwards but I was wondering if anyone  has had any luck or found any other ways to finance without going through a traditional lender or getting a short term loan with a balloon payment from a community bank.

[Parker Borofsky]

Hi Scott - I am a Loan Officer and I do a ton of investment properties in the Smoky Mountains which are short-term/overnight rentals.  The guideline for Fannie is that you can use 75% of a fair market rent value assigned by an appraiser.  Because most of the market in the Smokies is short-term the appraisers typically use this value.  However, even if the appraiser did a fair market rent value as a long-term you should be able to use 75% of that value for qualifying rent income purposes on an investment purchase.  If you have an existing short term rental and want to use rent from that property to qualify you would either have to have a schedule E with one year's results to use or yes a long term lease if you have owned it less than a year and do not have a schedule E yet.  Hope that helps!