Are There Other Options For Financing An Airbnb Property Purchase?
If financing a property conventionally to use for short-term leases doesn’t work for your circ*mstances, don’t worry – there are plenty of other options. Here are a few other ways you can secure financing and start renting out a home, with and without Airbnb.
Buy A Second Home And Rent It Out Part Time To Establish Your Income Producing Potential
Remember, a loan for a second home or investment property will always be considered riskier by lenders than a mortgage on your primary residence. Investing in another property for short-term rental purposes is even riskier. For more financial stability, you might consider buying a second home and, rather than allowing visitors to rent it frequently, rent it out long-term to tenants.
This way, you can establish regular income via monthly rent and reduce some of the risks that come with managing an Airbnb home, such as damages or messes created by guests.
Buy A Multi-Unit Property And Live Onsite
If you’re willing to invest in a multiunit property and live onsite, it’s possible to qualify for an FHA or VA loan on the property, which both tend to have more forgiving credit and income requirements than conventional loans. While you would have to live on the property and it could have a maximum of four units, this is an accessible way to get started as an Airbnb host, as you could rent out the other spaces – up to three – to travelers.
Offer A Larger Down Payment
If your application to get a conventional loan for an investment property is a bit shaky, you can sometimes remedy this by simply making a larger down payment if you’re able. While 15% will likely be required already, if you can do more, your lender may be more willing to agree to a loan, even for a property being used for short-term stays.
Consider A Home Equity Loan
A home equity loan, sometimes called a second mortgage, is another potential option if you’re looking for ways to finance an Airbnb rental. Home equity loans and home equity lines of credit (HELOCs) can provide you with money in the form of a lump sum (or line of credit) based on the amount of equity in your primary home. This can be a great way to free up some of your assets if your money is all ‘locked away’ in a mortgage.
This extra money is a great way to finance new investments, but keep in mind you must repay it or there could be potentially severe consequences. Since a second mortgage holds your home as collateral, you could risk foreclosure if you are unable to pay it back.
