Brrr + STR "Refinance" Question

[Brandi Scharrer]

When using the Brrr method and it comes time to refinance do you have to show any rental history of the property being rented? Is that something the lenders take into consideration? If so, how much?

Found a property that looks like a good opportunity to Brrr in Michigan, the difference is I don't want to rent to a longer term tenant but instead want to do a STR. The property is out of state, but in the area we grew up in and that we return to every year to visit family and friends. We normally stay for 3-4 mos and stay in another STR. I'd like to stay in our own property moving forward when in town but then STR it the other months of the year. Will I need to show proof of any renting history to the lender when I refinance? Thanks in advance!

[Julie McCoy]

@Brandi Scharrer It is very uncommon for a bank to take projected STR income into consideration for refinancing; appraisers will almost never consider it, and that is the opinion the banks will rely on. In the BRRRR method, the refinance is based on having a long-term lease in place that shows a certain amount of income relative to the loan price; this is not possible with STRs. If the property is in a market where the overwhelming highest and best use is STRs (as it is in Gatlinburg/Pigeon Forge where I invest), then there's a possibility local appraisers take that into account and the lenders might accept it, but that's definitely a conversation to have before you get started. (even in GB/PF not all appraisers are willing to take STR income into account). @Parker Borofsky can talk in detail about this.

But in general, no, you cannot use projected STR income as a means to refinance the house. If you can qualify for the refi in other ways (based on your own strength as a borrower) then awesome, but on the property's income basis, not generally through a conventional loan. I know a private lender who might do it, but then you're talking about higher fees and interest rates, etc.