All Forum Posts by: Tanner Lewis

@Zach Edelman Is one of the top lenders in the STR space, Zach, do you think that you would be able to lend on this?

As a private lender, I would do the following:

1. Transfer your mother's house into an LLC and rent out (likely as an LTR)

2. Take a DSCR cash-out refinance on your mother's house with a hard money/private lender. They will not use your DTI to qualify you, only the DSCR (essentially monthly effective gross income minus insurance, taxes, and HOA fees), LTV, and your FICO credit score.

3. With the cash-out proceeds, you cannot pay off current debt, but you can invest in more real estate offering a higher rate of return than the debt (ex. 15% return on a house vs 11% rate on debt, the investment has less opportunity cost. I would use your household income of $200k to address the debt.

3a. I would use the cash-out proceeds to put down payments on up to 3 additional rentals with a private lender DSCR product.

4. Use a conventional owner-occupied home loan to purchase your personal home. I would look at an FHA-type loan with 3.5% down plus PMI or a 5% down owner-occupied option. This will give you the most leverage and you will allow you to add even more properties to your portfolio, increasing return and decreasing the risk.

Aren't traveling nurse programs considered a mid-term rental not an STR? I would make sure the lease permits STRs as well as MTRs if you decide to go that route.

I have noticed that this tends to help when you have a "hotel-like business" with multiple properties that are adjacent and are in a unique structure/location. Ex. 10 cabin STRs in the mountains with shared amenities. 

I don't think Instagram accounts for one-off properties are a productive way to drive bookings, but it may be a good way to showcase your STR portfolio.

I suggest taking out a cash-out refi on the property. Depending on how you wish to structure the deal, a hard money/private lender could give you a 30-year fixed-rate mortgage as low as 7-8%, allowing you solid cash flow, but the trade-off would be the higher closing costs. 

I am against selling a property if it has solid cash flow, and would instead use leverage to keep the second property. The cash-out rate with your lender seems very high, I suggest looking for another lender that would allow you to restructure the loan to accommodate a lower interest rate. 

If you are looking into HELOCs, I would also look into cash-out refinances, there are many hard-money/private lenders that offer DSCR cash-out refinances as low as 7% interest rates. Many traditional lenders will not be able to qualify you with your rental income whereas private money lenders are able to use your FICO, DSCR (rental income), and LTV to qualify you for a loan.

I suggest either seller financing where you take over your father's loan (if applicable), or I would partner with someone that can bring 30k to the table (doesn't have to be a 50/50 split). 

I would also consider assuming their loan (if they have one) since interest rates have spiked and they likely got the home loan at a much lower rate than you can get today. 

Hi April, I suggest writing a profit split into the contract if you have not already done so. This will help to incentivize the landlord to allow you to Airbnb arbitrage. 

If not, possibly look for landlords that permit subleasing? This might be a way to comply with the LTR lease while putting it on Airbnb, but I would consult a lawyer before doing this as it would be a more "gray area" alternative. 

I am also looking into Airbnb arbitrage in this area, so if you have any helpful tips we should connect!

Assuming you are getting traditional or private lending, many institutions will have LTV requirements and required reserves for that problem. The required reserves will ensure the borrower has enough short-term cash flow to satisfy liquidity requirements and the LTV is a cushion for lenders in the event that they have to foreclose on a property.