Seems like a bit of a hit piece, but does raise an interesting question.

No doubt, we are in uncharted territory regarding STR rates and the corresponding values that STR properties are trading for. If (when) these rates come back down to earth, what's going to happen to the loans that are predicated on the premium rates?

I know there are a couple lenders that are well versed in these products so thought it would interesting to hear a counter point.

Quote:

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Visio Lending in Austin, which call itself the "nation's leader in rental loans," financed Jones's mortgage. One of its rivals is HomeXpress Mortgage Corp., based in Santa Ana, Calif., and owned by New York hedge fund Seer Capital Management. HomeXpress is trawling for more brokers to sell this kind of loan. "No income verification, no job listed," Christopher Berrey, one of its account executives, posted on his LinkedIn profile. "AirBNB and VRBO are ACCEPTABLE!!!" In an interview, Berrey says the loans' simplicity makes them popular. "There's less underwriting," he says. "Less of pretty much everything."

Another company, Hometown Equity Mortgage LLC, which does business as TheLender, is promoting its "Non Owner No Income," or "NONI," loans to mortgage brokers. Its acronym is also Italian slang for "grandmother." A Facebook ad features a gray-haired woman in a red bathing suit, a straw hat, and red heart-shaped sunglasses who floats in a pool, a martini glass in hand: "Our NONI likes to Airbnb. The NONI program allows borrowers to use income from vacation rentals, like Airbnb and VRBO … Results without the B.S."

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Some of these comments from brokers sounds a lot like the subprime sales pitches I heard in the mid-2000s. Scale is obviously smaller.

https://www.bloomberg.com/news/features/2022-06-14/airbnb-rentals-turn-into-real-estate-goldmines-with-easy-money-mortgages?

Have spoken with Visio and The Lender. Both offer easy financing for a commercial type loan for folks who are maxed out on personal DTI but have funds available to take down deals.

However, both have prepayment penalties that are very unattractive to someone looking for divesting (or even cash out refi) flexibility in the <5 yr time frame.

bkag9824 said:

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Have spoken with Visio and The Lender. Both offer easy financing for a commercial type loan for folks who are maxed out on personal DTI but have funds available to take down deals.

However, both have prepayment penalties that are very unattractive to someone looking for divesting (or even cash out refi) flexibility in the <5 yr time frame.

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How much LTV do they require? What sort of rates are we talking about here? Has to be in the 8%+ I would think to make the right returns.

Any auto-sweep functions? (Make more than projected, pay down loan faster to more acceptable LTV)?

Most will allow 80% LTV, some require 75%. Rates when I last checked a couple months ago were in the low-mid 7s. A guesstimate is that their rates will typically be 1.5-2% higher than what you could get with conventional/2nd/vacation financing.

Most will also have prepayment penalties. They generally discourage paying the loan down quickly so as to maximize their interest returns.