All Forum Posts by: Adam Windham

@Collyn Bennett second the above, the DSCR loan is probably the best financing option for scalability. These loans can be underwritten with projected short term rental income from sites like AirDNA and Rabbu, if the property doesn't have prior operating history. I just recommend doing your due diligence and make sure you work with a lender that understands short term rentals, a lot of DSCR lenders out there claim they can do short term rentals, but really try to underwrite with standard long term rental / market rental rates and most of the time that does not work out and the deal falls apart or gets re-traded on terms.

Generally just need to see 51% of the building square footage be residential and then you could use a DSCR loan and underwrite with the combined residential and commercial income of the property.

Hi Elizabeth - Host Financial can certainly help with this situation! Feel free to send me a DM with the additional details on the deal or you can submit them through our website at www.hostfinancial.com

Like anything, AirDNA is just a tool and will give you one data point, I wouldn't base your go / no-go decision based on AirDNA. However, if you're looking to use a DSCR loan, and the property does not have any prior short term rental operating history, a DSCR lender is going to need to underwrite the loan using either the AirDNA figures or Rabbu figures, so those projections are important in the context of getting approved for a DSCR loan.

Make sure that he knows what kind of loan he has on an STR...if its a investor / DSCR / Business Purpose loan then it has a non-owner occupant component and it would be a violation of the loan document for him to occupy as his primary. If his existing lender finds out, they can call the note or force a refinance.

Hi Jordi - confirming some of the numbers above for DSCR loans, generally maximum LTV for a cash out is 75% LTV, a rate and term refinance could go up to 80%, maybe 85% depending on the seasoning and rental strategy.

Hi Collin, 

You can use a DSCR loan and underwrite using the short term rental income of each unit - actual or projected depending on how many months of operating history each unit has. Typical minimum DSCR on a multi-unit is a 1.10 or 1.15x DSCR - best rates and terms with be at a 1.25x and above.

As far as value goes, most, if not all, commercial apprisers are going to value the property based on the long term rents and long term rental cap rates. Increasing the underlying value of the property just because it's operating as a short term rental is still not generally accepted by most lenders or appraisers. Hopefully that is something that changes as short term rentals become a more established asset class. 

@Jonathan Krauser should be pretty straight forward, make sure you get set up with a 1031 exchange accommodator prior to selling the flip. Once you sell that property, they will receive the proceeds and hold in "escrow" for you until you purchase the new multi-family property. Be sure to be mindful of the identification period and closing period to complete the 1031 exchange.

@Travis C. any lender is going to value them based on sales comps, not cap rate on the cash flow or NOI. So any buyer is going to be constrained on their loan proceeds by LTV x Market/Sales Comp valuation.

That being said, I have seen many investors sell their performing properties at a premium above just the pure value of the real estate. Just know that any buyer is going to need to make up that difference in equity. 

Hope that helps!

@David N. as with any real estate deal, it all depends! If you can get a really good deal on a fixer upper that is going to spin off more cash flow then a pure purchase (and its in your budget) then that is worth considering. I will say that with STR's what is more and more important is having some unique draw about your property that will get people to book over the other options. The days of putting just any old house on AirBNB and doing really well are over.