An investor’s guide to Airbnb loans – Financing an Airbnb rental
As more and more travelers look for affordable and comfortable accommodations while on vacation, operating an Airbnb property has become a lucrative option for investors. Are you someone who is intrigued by the prospects of becoming an Airbnb host or a rental property owner but you’re unsure about where to begin from? If yes, you needn’t fret as we will take a detailed look into the basics of Airbnb property financing in this post.
Airbnb Loan – What is it?
Airbnb is a digital platform that lets homeowners rent out their houses for a short time period for visitors. Hosts have the discretion to decide how much they would like to charge the visitors every night. The hosts will also be responsible to handling the property all by themselves. Listing a property on Airbnb is free but there are fees charged to both the visitor and the host for utilizing this platform.
Before you take out a mortgage loan for funding your Airbnb rental, bear in mind that mortgages taken out for investment properties work in a different pattern than a loan taken out for your primary home. You will require a large down payment to secure the loan, usually a minimum amount of 15% and you may also face sky-high rates on them as well.
Airbnb financing options
Of late, Airbnb has got together with Citizens Bank, Fannie Mae, Quicken Loans, and Better Mortgage to help hosts of Airbnb properties to refinance their mortgage loans. They take into account details according to the rental income to decide on a lending rate.
Once you refinance your current mortgage loan, the equity proceeds or the amount saved with mortgage decrease can be utilized for buying a rental property. Moreover, since this is a brand-new loan structure, it might help offering homeowners the chance to rent out their house more often.
In case you’re someone who is opting for a mortgage refinance as your only option for Airbnb financing, you’ll have to be prepared this way:
- You have to prove that your home is your only residence located within the US
- You have to take out a copy of your credit report to decide your scores
- You have to decide on your debt-to-income ratio to keep distance from any surprises during the application process
Although there are several other factors and qualifications to consider, most of these will vary from one lender to another.
Airbnb financing – What are the options available?
Considering the sad state of traveling during pandemic, this is certainly not the best time to get funding for Airbnb property. However, if you’re sure about the risks and you’re all set to work on the Airbnb rental property, check out your options:
Getting an Airbnb mortgage
When you choose to run a rental Airbnb which is not a part of your existing home or your current property, you will have to finance a new property for using it in the form of short-term rental. For this, you have to get a mortgage. While there are lenders who provide mortgages for investment properties and second homes, it can get tough to secure a loan for a real estate property that will be used for short-term rental.
Go for an Airbnb refinance
If the current Airbnb hosts look forward to refinance their properties to get low rates, you can tap into the equity to fund one more investment. Airbnb joined hands with Fannie Mae in 2018 and many other financial institutions including Rocket Mortgage to make it easier for hosts to utilize their Airbnb income proof on their refinance mortgage applications.
Take out an Airbnb business loan
There are several investors who consider their Airbnb property as their business and in most cases, they are! In between cleaning and property management, their property actually starts being treated as a business. Lenders have already realized this and hence there are options for these hosts. Small business loans can now be taken out by Airbnb investors.
Conclusion
Hence, when you’re considering Airbnb property financing, choose any of the above listed financing options. If you’re a novice, have a talk with a professional financial consultant who can give you ample advice on the right decisions.