Sarah was new to being an empty nester. She had recently retired and both children were off to college. Sarah was use to a busy, hectic schedule—now she had nothing but time. To make a little extra income and occupy her time she became an ARIZONA AIRBNB LOAN host—renting out her two spare bedrooms in Phoenix. After two years, over 300 visitors and close to $60,000—she decided to buy property and grow her small business. The bank wouldn’t approve her, as most banks do not approve a second mortgage for a rental property, so she took out a hard money loan.
An airbnb in your home and an airbnb property are two different animals. When you simply rent out a room—that is all there is to it. When you rent out a property—you have to somehow obtain financing to purchase the property, and that is where the difficulty in becoming an airbnb host.
Gaining financing is an airbnb host’s biggest challenge. Because banks are more closely scrutinizing how properties are being used when it comes to new mortgages and refinancing existing mortgages it makes it difficult to gain approval on a loan for an airbnb. Mortgages on rental properties are viewed as risky to banks. Most banks will not even extend home equity lines of credit for an airbnb rental property.
HARD MONEY LOANS FINANCE ARIZONA AIRBNB LOAN PROPERTIES
A hard money loan is an asset-based loan in which a borrower receives funds that are secured by real estate. These loans usually range between 7%-15%. And although these rates are high compared to a traditional bank it is because they are short-term and riskier for the lender. The loan amount is determined by the loan-to-value (LTV). LTV is the loan amount divided by the value of the property. Most lenders will lend around 75% of the value of the property, but you can find 100% financing, as well. These are short-term loans typically ranging from 6 months to a year—but in certain situations the terms run up to five years.
Hard money loans are becoming popular with airbnb hosts, due to the simplicity of the loan. Most borrowers are pre-approved within minutes and have their funds readily available in less than 15 days. Hard money loans are not to be used as a replacement for a traditional mortgage, but can be used until approval for a conventional mortgage comes. These loans rarely carry early payment penalties, which means the borrower can pay it off whenever they have the finances.
Once a borrower can prove consistent income to the bank they have a higher likelihood of approval.
After two years and over $75,000 Sarah was able to prove her bank that this was legitimate extra income. She was able to pay off her hard money loan a year early and transition into a conventional mortgage on her airbnb properties. Thankfully, the Arizona Hard Money Lender was there when she needed a jump-start on her new small business career.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.