you list your home, condo, or other property on Airbnb (or another rental property site) and people rent the space from you. It’s a common property investment strategy for people who own second homes or spend a lot of time away from their primary residence.
Airbnb financing is one way you can take advantage of the rental property market. You secure rental property loans and use the income from your Airbnb rental to pay off the loan. It’s a pretty straightforward investment property financing solution, but there are a few things you want to keep in mind about Airbnb financing:
- Airbnb financing offers all have different terms from each other, so you want to compare them carefully.
- Your monthly loan payments need to be lower than your income to get the most value from Airbnb financing offers
- Airbnb loans might have different terms than a primary mortgage, so new investors should thoroughly review their contracts.
Airbnb financing is one of many investment property strategies for people who want to leverage their capital without learning the ins-and-outs of the stock market.
3 Reasons Airbnb Financing Might Be Right for You
If you are considering whether Airbnb financing is the right choice for your investment portfolio, there are three reasons it could work for you.
1. You have limited liquid assets and good credit.
Even with the best credit, Airbnb financing has a cost. You’re not going to find an “interest-free” loan, so you need to utilize investment property financing wisely. If you have a lot of cash on hand, it might be less expensive for you to purchase the rental property outright.
However, if you have limited access to liquid assets, Airbnb financing can be a great property investment strategy. Good credit is essential, too. To get the best Airbnb financing offers, you’ll need to have a credit score that is considered “excellent,” or above 800, according to Experian.
2. You can generate sufficient income with your property.
One critical aspect of Airbnb financing is ensuring that your loan payments don’t grossly exceed your rental income. If you have a rental property that is unique or offers other differentiating factors, you should be able to capitalize on that when you list your prices.
Some key factors can boost the amount of rental income you receive. Location is one of the most critical components of generating income with an Airbnb rental. Make the space warm and inviting and include technology updates that offer security and convenience.
3. You have other income to cover any shortfall.
Airbnb financing is a great tool, but it only works if you can generate enough income to cover your loan payments. In the beginning, when you first list a rental property, it can be hard to earn enough because you don’t have the credibility other people have.
If you are new to Airbnb financing, it’s wise to have another source of income until you establish consistent rentals and have legitimate customer reviews. This might also be critical to securing your Airbnb financing offers, as most lenders require a certain amount of income.
Tips for Finding the Best Airbnb Financing Offers
There are at least half a dozen different types of Airbnb financing solutions, plus hundreds of lenders looking to capitalize on your property investment strategies. That means it can be difficult to find the best financing offers for your situation.
With the right approach though, you can find the best investment property financing options for your rental property. Here are three tips that can make your search a little more productive:
Do your research: Like investing in the stock market, you need to know what you’re getting into. With respect to Airbnb financing, that means you’ll need to research the area you want to purchase property, the types of loans available to you, and whether or not your area allows Airbnb rentals.
Review your financials: Airbnb isn’t a guaranteed source of income, so your financials need to be in order before you apply for financing. Review your credit report and score to make sure it’s accurate. Then put together a comprehensive report of your income and expenses.
Evaluate your potential: After you know where you want to buy an investment property and where you stand financially, you can figure out which types of loans are best for you. You should have a few options at this point. A spreadsheet, while boring, can help list out the costs of each.
This isn’t something you can do in a matter of an hour. You’ll want to spend extra time in the research phase to make sure you’re getting the best offers and making the most money.
How to Choose the Best Airbnb Financing Solution
Now that you understand the value of Airbnb financing and have a list of potential loan offers, you’ll need to narrow it down even further. The most important things to compare in your Airbnb financing offers are:
Interest rate and APR
Length of the loan
Additional costs of the loan
Of course, there might be other benefits of choosing one lender over another. You might prefer the user experience with one lender even though your loan terms aren’t the best. Alternatively, you might find one that charges prepayment penalties that you want to avoid. Compare every detail for the best decision.
Looking for the best Airbnb financing offers? Rental Home Financing has multiple investment property financing options depending on your needs.