What are short-term rentals?
Short-term rentals are properties that are rented out nightly, weekly or even on a seasonal basis for a brief period of time. They are also referred to as vacation rentals, short-term vacation rentals or transient rentals. Properties where the owner designates less than 50% of their time is considered a non-owner-occupied home. Deephaven Mortgage’s loans for short-term rentals falls under our DSCR program for non-owner-occupied properties only.
What is the opportunity for short-term rentals?
Short-term rentals are becoming increasingly popular due to the success of companies such as Airbnb and VRBO. The number of listings for these rental properties continue to increase with a multitude of websites offering them.
It’s no wonder then that real estate investors seek to build their portfolios purchasing homes to rent out on a short-term basis. There is a lot to consider when becoming an owner of a short-term property beyond compliance and the varying jurisdictions with local governments. Loans for short-term rentals involve some understanding as well, making it crucial for an originator to partner with a lender experienced in this sector.
Making the process easy for your real estate investors will cement your relationship as a go-to for future transactions.
What is required for income qualification?
Deephaven’s guidelines state that short-term rental income received directly from a home-sharing service (such as Airbnb or VRBO) or property management services may be used for qualification when any of the following requirements are met:
- 12 months evidence of receipt via the home-sharing service or property management company.
- Receipt must identify the subject property/unit and all rents collected for the previous 12 months. Rental income used will be net of any management or vendor fees.
- Property ownership report obtained and proof of property listing on service provider website.
Is the actual amount of rent collected needed to qualify?
Deephaven allows for the actual rent collected to be utilized over the amount listed on a STR 1007 or narrative with the parameters listed in our guidelines. The information could come from VRBO, Airbnb, AirDNA or the property management company and proof of the site listing should be included.
What loan product allows short-term rentals?
Deephaven Mortgage’s DSCR cash flow loan specifically for real estate investors allows short-term rentals. One great benefit of a DSCR loan is that it is a low hassle and quick to close loan.
Other benefits include:
- Personal income and employment information is not required.
- There is no limit to the number of financed properties.
- Investors can commit to many properties simultaneously. More than one loan for different properties can be closed at once.
- Real estate investors can borrow or vest in the name of an LLC.
- Non-warrantable condos are allowed.
Our DSCR loan is one of our top utilized products for real estate investors to build their portfolios. According to CoreLogic, 27% of purchases are investment transactions. Don’t miss out on an opportunity to expand your referrals and pool of borrowers.
Originators can learn more about marketing to real estate investors promoting that they can help with short-term rental purchases by partnering with Deephaven.
Already a partner? Contact your sales representative for more information. If you aren’t a partner with us, you can be easily by starting the process here: https://deephavenmortgage.com/become-a-partner/
Adding DSCR and our full suite of non-QM products to your offerings allows you to fully serve all borrowers and grow your business!
