Skip to content
SCHEDULE CONSULTATION

A Beginner’s Guide to Airbnb Mortgages

September 16, 2022 |
A Beginner’s Guide to Airbnb Mortgages

As you must know, Airbnb is a hospitality platform where homeowners can list their entire home, investment property, or even some extra rooms for booking by travelers.

It’s no secret that the short-term rental industry initially suffered due to the safety concerns and health restrictions of the pandemic.

However, more people started booking longer-term rental stays because of flexible working arrangements due to the pandemic, says Airbnb CEO Brian Chesky.

Now, more and more travelers are on the lookout for affordable and comfortable accommodations, and this makes Airbnb properties an attractive investment. Therefore, many Airbnb hosts are eager to get back to business as usual. 

Many people dream of purchasing a vacation home but fail to do so. Airbnb makes it easier to achieve that because you can invest in a vacation home that you can rent out most of the year.

When you become an Airbnb host, you can recoup the money spent on buying the property and make significant profits.

After reading this article, you will know all about Airbnb property mortgages so you can buy a dream vacation home or investment property and make money through it.

About Airbnb Loans

An Airbnb loan is any type of financing or loan that a person uses to buy an investment property. Although there is actually no specific “Airbnb loan”, some mortgage lenders do have loan programs that are dedicated to rental property buyers and are ideal for starting or growing an Airbnb business.

These loans are mortgages that work a bit differently than a normal residential property loan. In most cases, you have to pay a minimum 15% down payment, but you may be able to use the property’s expected rental income to qualify.

Options to Finance an Airbnb Property

There are various options when it comes to financing an Airbnb rental property. Whatever option you choose, remember to preserve liquidity with a low down payment and avoid wasting time by working with a lender that offers flexible qualifying options.

With most investment property financing, you must have a FICO credit score of at least 640 or more and a downpayment of at least 15%. 

Here are some of the available options-

Investment Property Loan

Our top option for financing an Airbnb rental property is working with a lender to qualify for an investment property loan program. Such loans allow real estate investors to qualify using the property's cash flow instead of tax returns so they can get approved and close on their rental property.

 Finding a lender like LoanBud that offers investor-focused lending programs will help you secure an investment property loan quicker and with less restrictive terms, such as:

  • Not requiring tax returns or personal income required
  • Providing a loan to value (LTV) as high as 85%
  • Offering larger loan sizes up to $5,000,000
  • Permitting to use of gifts for the down payment or closing costs
  • Allowing first-time home-buyers
  • Cash-out refinance up to 85% of your investment property's appraised value

Cash-Out Refinance

It is difficult for most people to make the down payment for an Airbnb rental, and through cash-out refinance, investors can tap into their home equity.

Through this, you can receive a larger mortgage than the amount you owe on your property and a lump sum of cash valued at the difference between the two. 

If you already own an investment property, a cash-out refinance can also help you unlock your investment property equity to receive the maximum cash to grow your Airbnb business.

If you have enough home equity, cash-out refinancing can fund your rental property purchase completely. 

Some big banks will limit the amount of cash out to $250k or $500k. More modern lenders like LoanBud do not limit how much cash you can receive up to the program LTV requirements.

Qualifying with Rental Property Income

Many people would like to build wealth through real estate. In order to do that, you need a mortgage.

The problem is that most real estate investors have a tough time getting approved for a mortgage because of their tax returns, which can make anyone in that position feel frustrated and out of options.

LoanBud allows real estate investors to qualify using a property’s rental income instead of using tax returns or personal income. Programs like this help more real estate investors stop worrying about a mortgage and start focusing on growing their real estate empire.

Qualifying with Bank Statements or 1099’s

Most business owners, freelancers, and entrepreneurs have difficulty getting a mortgage because of their tax returns. When you’re self-employed, you know that you want to write off as many deductions as possible so you don’t pay any more in taxes than you need to.

The problem is most big banks only use tax returns to qualify someone for a mortgage, leaving the self-employed community without options. Some lenders, like LoanBud, allow you to qualify for a mortgage using your tax returns or 1099’s instead of your tax returns.

Conventional Mortgage

If you do have tax returns and want to get the best possible rate on your loan, another option for you is a conventional mortgage. A strong financial background is necessary to qualify for a conventional mortgage loan.

In most cases, your credit score must be 640 or more, and you will have to make a down payment of 15-20%. You will also need to show cash reserves for maintenance costs and to cover vacancies. 

Things to Consider Before Investing in an Airbnb Rental

  • Expenses and income – Calculate your expenses and income to ensure you can make money and don’t end up with losses. Search for similar rental properties to know about the pricing and booking. Make a list of expenses that include mortgage payments, services fees, maintenance costs, etc. 
  • Licensing – Make sure you have valid licensing or permits to rent a property in a particular location. 
  • Rules and regulations – Different places have different laws regarding rental properties. Some places don’t allow renting your property for over a month. Make sure you know all local rules and regulations.
  • Occupancy tax - Some cities need hosts to collect occupancy tax from guests. In some locations, it is collected automatically by Airbnb but not for some locations. Check local tax laws and consult whether Airbnb will collect the occupancy tax from guests or not. 

Conclusion

COVID-19 had a big effect on the travel industry, but long-term rentals became more popular and with things opening up again, people are traveling regularly.

Airbnb is a great platform for buying and renting vacation homes, and with a lender like LoanBud, who understands real estate investors, you can receive financing to purchase an Airbnb rental property.

If you want to know what options are best suited for you for obtaining Airbnb financing, schedule a consultation with a LoanBud loan officer. We will help you create a plan to buy your dream vacation property and start your Airbnb business.

Share with Friends

Contact Us

(484) LOAN-BUD
777 Brickell Ave Suite 500
Miami FL, 33131

SUBSCRIBE TO NEWSLETTER

LoanBud is a Division of BayFirst National Bank, N.A., Member FDIC, Equal Housing Lender NMLS ID 806183 Copyright © 2022. All rights reserved.
*Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.

Privacy Policy