All Forum Posts by: Clayton Silva

What is the total loan amount?  What is the value of the home? What is the expected income of renting it on Airbnb? What is your goal (to keep more cash on hand, or to have more cash flow)?  What are the operating expenses of running the Airbnb? Are you hiring a manager, if so what do they charge?

You don't need verifiable income for ground up construction or DSCR. You will need significant liquid funds though for down payment, closing costs, and reserves. For a new developer with no experience, I would count on having to have 25% of total project cost (if land is 150k and cost to build is 350k, total project cost is 500k so expect to put down 125k). Then you will need funds for closing costs (between 3-5% of loan amount for this kind of project, possibly more). Then enough reserves for overages, unforeseen expenses, and monthly interest payments so another 10-15% in total costs in liquid reserves. A 500k project, you will want to have close to 175-200k liquid.

Unfortunately the 3 asset classes that banks are not fond of right now are rural properties, commercial office space, and vacant land. I have not seen any vacant land loans over like 60-65% LTV in a long time unless you are wrapping development into the loan.

Yes it is counted toward your DTI. However 2 things to note: 1) DSCR loans for future investment property acquisitions do not care about your DTI (DTI only really matters when buying a new primary or any time you are using a Fannie/Freddie/Ginnie loan). 2) After 12 months of proof of someone else paying it for you, you may be able to omit it from your DTI calculation. However, you will have to explain it to underwriting and they will likely have to be on deed/title which could result in the note being called due.

Definitely a good question that would require a little more homework and guideline digging to know for sure.

I know someone who would be interested in that in the area. I'll DM you her info

I have been doing everything on Turbotenant and loving it there.  I also use Baselane for banking and accounting because you can mark each transaction with a tag.  Plus Baselane pays like 2-4% interest on the checking account which is nuts!

Turbotenant is super easy to use and cannot recommend them enough.  

The process never seems to be stress free no matter how many transactions you do.  I would just try to enjoy the ride and learn as much as you can along the way.  Document everything so you can streamline the process in the future and learn from any pitfalls along the way.  Really your team are going to be what make a transaction smooth (realtor, lender, insurance agent, title agent, etc).  Lastly, to make it easy on the lender, I would recommend making sure you upload clear, legible, PDF files for documents to save the hassle of having to do multiple requests for the same thing.  Best of luck and wishing you a smooth closing!

2.75 on a 15 is going to be close to market rates on a 30 or 40. Might consider a longer amortization period with maybe an interest only option on the front end. Example: 40 year DSCR with a 10 year interest only period. It may reduce the payments.

If the home is vacant, the loan is underwritten off the appraisers assessment of market rent. What you do with the home is up to you as long as it's business purpose. 

Most DSCR banks aren't going to have a problem with rent by the room, but getting credit for rent by the room from an underwriting perspective is a nightmare so I was trying to save the OP a lot of jumping through hoops in underwriting.

You do not have to, and often should not, share everything with the bank. Do the bare minimum they ask. But as I mentioned, if you want to share you can, but the most streamlined way is to have one tenant sign the master lease and sublet the additional rooms. 

I'd be a little more careful with the accusations in the future, I've been in lending and banking for years now and know the guidelines well and have closed hundreds of DSCR loans. My entire point is that many different rental types, (Airbnb, rent by the room, RAL, mid term rental, etc) are allowable by the banks, but the easiest way to get to closing is to use the appraisers assessment of market rent if the property is still vacant. If it doesn't DSCR off that, then you have additional hurdles you'll need to show to justify why you'll get higher rents (at this point you would share that you're renting by the room).

Easily doable as a conventional or DSCR loan but you are going to want to get the financing in order BEFORE you start renting by the room. It will make it easier to secure financing per most lender's underwriting guidelines (they typically do not like rent by the room). If you have already rented it out by the room, I would generally recommend having one tenant sign a master lease and then have them sublet the rest of the rooms to make it easier for you to get financing as well. Best of luck and hope this helps!