3 Potential Obstacles When Financing an Airbnb You Need to Know About

Airbnb rentals are a huge business opportunity and the potential for profit is high. Intrepid entrepreneurs owning multiple homes are in a unique position to benefit from the fledgling industry. While there’s a lot to know about these investments, financing for Airbnb loansshould be a primary focus early on.

You should be thinking about financing first before finding the perfect Airbnb property. Mobilizing capital can take a while when it has to be financed, which is typical of these ventures. With that in mind, you’ll need to know about the nuances of financing these projects before you can get started.

One problem you may encounter when seeking financing for your Airbnb property is that banks are perennially sensitive to the risks of rental investments. As such, banks will typically withhold credit on home equity funds, lines of credit, or loans.

Banks are getting pickier when you want to write out a new mortgage or refinance an existing mortgage. The uncertainties lie with how to classify your homeowner's loan when you're intentions are to rent it out to people as a primary residence or rental property. For this reason, mortgages for these types of properties are viewed as risky in most bank's eyes.

With the depreciation of property value, if left unchecked by home improvements, banks can end up losing money on the loans.

Another reason banks are a bad choice for seeking financing for Airbnb investment properties is that they don’t accommodate stated income loans. With a stated income loan, you can apply for an Airbnb loan without showing your tax returns—something that many investors appreciate.

Other challenges to getting an Airbnb loan financed by a bank are the restrictions of local laws. Every area will have different laws regarding renting a property. Banks will not loan out money for someone who intends to make an Airbnb that violates the law by operating as a rental property.

Nothing puts a damper on getting financed by a bank than it being an unknowingly illegal operation. The sad truth is that if it’s against local regulations, there’s no way you’re getting conventional financing for the property.

There are lots of additional costs when you become a host of an Airbnb, the most costly being the property itself. You'll either need to own the property outright or lease the property yourself so that you can rent it out to guests.

The next thing to take into consideration will be the taxes. You will have to send in reports of the money you earned if the Airbnb is rented out for more than 14 days per year. Along with that, if you do not own your property, the property must be reported as a rental.

Another thing to remember is that Airbnb charges hosts 3% commission to cover processing payments. Even with the low percentage, it can add up quickly, decreasing your profit.

The necessities for renting out your Airbnb, such as towels, soap, coffee, dishes, and sheets will add up depending on who you are renting to and how many people your rental can accommodate. You will also need to purchase furniture and some electronics that didn't come with the house, like couches, TVs, microwave, dressers, and beds.

Cleaning up after guests leave can become costly, whether you do it yourself or hire a company to come to do it. While some hosts add a cleaning fee to cover it—and you can as well—it will still be factored into your budget.

Last, you should have insurance. Anyone can rent your Airbnb, and anything can happen. Airbnb does offer some insurance, but it only covers basic liabilities and property protection. Having extra coverage will protect everything from unfortunate events like fires, theft, and floods.

With so much to pay for, it might seem like buying an Airbnb property is impractical given the potential costs and restrictions. While daunting, owning an Airbnb property can be tremendously advantageous financially.

These properties are the bread-and-butter of many real-estate investors. Airbnb rentals had over 100 million visitors in one year—numbers like that speak for themselves. As long as you do your homework on local regulations, keep costs down, and find the right lender, you can make a lot of money with an Airbnb.

Firms like Vacation Rental Property Loans have different packages available that are designed with the real-estate investor in mind. Short term vacation home rental loans can cover up to 75% of the property purchase.

For the more ambitious, blanket mortgages are open to investors looking to go in on more than one property. Blanket loans deliver lower payments and interest rates by organizing the financing for multiple properties under one loan. With a blanket loan, you only pay one flat fee instead of varied costs across multiple loans.

Vacation Rental Property Loans is a trusted industry leader and is known for excellent customer service with unparalleled flexibility. You can push through the obstacles of raising capital for your venture with fixed-rate Airbnb loans from Vacation Rental Property Loans.

We can cover up to 75% of the property purchase value. Don’t worry about providing W2s or other tax information, you won’t need it. All you’ll need is a credit score of around 600. Even if you’ve had bankruptcies, as long as it’s at least two years behind you, don’t sweat it. 

Get in touch with Vacation Rental Property Loans and cut through the red tape today!