Can you use a DSCR loan for investing in an Airbnb?
Short answer: yes. However, you may come across a few obstacles.
Using Standard Rental Rates for DSCR Loans
Typically, to refinance an Airbnb, a lender requires 2 years’ history of rents and expenses for the property.
If you can’t provide that, a DSCR loan could be an option for your short-term rental.
But to get the DSCR loan, you need to use the standard rental rates for a standard rental property in that area. Without a longer history, you can’t use your Airbnb rates as the income for the property.
This can be a major hurdle.
A property that’s successful with short-term rentals (Airbnb, VRBO, etc.), probably makes more money than a standard monthly rental in the same area. In fact, the monthly income from an Airbnb can be 3-4x the standard rents in an area.
But a DSCR will require you to use the number for standard rents. So it’s possible that even though your short-term rental is cash-flowing, it might not qualify for a DSCR loan.
Lenders and Airbnb Investing
DSCR loans vary from lender to lender. Three-quarters of DSCR lenders will be open to loaning for Airbnb properties. The other quarter will want nothing to do with it.
Some lenders look at Airbnb as a riskier investment. Cash-flow has the potential to be higher, but there are a lot of moving parts. Also, some municipalities put restrictions on short-term rentals, making them a more unpredictable investment in lenders’ eyes.
It’s still worthwhile to research a DSCR loan for investing in your Airbnb. You should always shop around – you’re bound to find the right lender with the right loan for your project.
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