How to Get Funding for an Airbnb

Renovation Loan

Major banks don’t have any loan products geared directly towards Airbnb rentals. However, there are loans for those who want to get into rental housing as well as a few other options for those who want to purchase a property to list on Airbnb.

Funding for Airbnb Rentals – The Traditional Route

Airbnb has a collaborative relationship with several major lenders to help homeowners refinance their current loans. You can use rental income gained by the property as income for the mortgage application. So if you already rent out your home or part of your home, you can use that income to increase your likelihood of approval.

As a result of refinancing your mortgage, you can roll that money you save off your monthly payment to invest in another property. Save that money until you have enough for a down payment on another rental property. Look for multi-family properties to rent out as Airbnb apartments, as they don’t cost much more than single-family homes to purchase, and you can get dramatically more income from these types of properties.

Be aware that a different type of loan structure from a regular loan for rental housing might be necessary, as short-term rental income might not work for all lenders. Make sure your lender weighs short-term rental income into the application.

If you go the mortgage refinance route, you might be required to live in the residence you’re listing on Airbnb. You’ll also need good credit and a low debt to income ratio to secure these types of loans. If this requirement isn’t for you, worry not. There are other types of financing out there.

Other Types of Financing for Airbnb Properties

If you don’t want renters in your primary residents, you’ll need a different type of financing. You need a loan product that’s geared more toward real estate investment than single-family home ownership. Here’s what to look for:

  1. Owner-Occupied Investment Properties – While there are some traditional loan products that will allow you to purchase a home and rent out a room, these types of loans are a little different. With this loan, you can purchase apartment buildings or duplexes/four-plexes, etc. You live in one of the dwellings while your renters who live in the other dwellings provide you with income to pay the loan. Income is more important for these types of loans than your credit score, but you should work on both before you apply.
  2. Investment Properties – This type of loan will require you to have a credit score of at least 640, liquid reserves in the bank, a substantial down payment, and a low debt to income ratio. It helps if the property is worth more than the asking price. The advantage of this type of loan is the low interest rate and favorable loan terms.
  3. HELOC – Home equity loans and lines of credit basically allow you to leverage the equity you have in your home. You use the funds just like a loan or a line of credit. You can purchase a rental property and the payments for your home mortgage won’t increase. You just pay more in interest over time because the borrowed sum is tacked onto the back end of the loan, making it take longer to pay off the mortgage.

Potempa Team Offers Loans for Airbnb Properties

If you’re interested in buying an Airbnb property but you don’t have a lender, we can help. Contact us now to learn about loan rates and loan products tailored to fit your financial goals.

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