For real estate investors who are looking to find the right investment property loan for their short term rental property purchase, Debt Service Coverage Ratio loans may be the answer. DSCR loans give investors the opportunity to enjoy a streamlined loan application that is based on the property’s rental income and cash flow, and less on their personal income.

Here’s a step-by-step guide on how to get DSCR loans for Airbnb property:   

Step 1: Find the right property

When it comes to short term rental loans, DSCR loans can be the best financing alternative. However, due to the fact that DSCR loans are based on the rental income from the property and its cash flow, investors should focus on finding investment properties that will earn as much as possible.

Airbnb financing can be tricky, but finding a property that has a high earning potential will give investors the best chance at qualifying for DSCR loans. Places where people go on vacation (such as properties near convention centers or theme parks) are a good place to start. It’s important to consider the local real estate market and use this to find high rental income generating properties. This will give investors a good chance at qualifying for an investment property loan.

Step 2: Make sure you meet the criteria

The next step in the journey to receiving short term rental loans for Airbnb property is to make sure that you and the property would both meet the criteria expected of a lender. Loan qualification criteria can vary between lenders, however there are a few general requirements that are used across the board.

These usually include a minimum credit score, a certain amount of liquid assets, and a down payment of anything between 10% and 30% of the property’s value. You’ll also need to demonstrate a strong rental history and positive cash flow for the property.

Step 3: Choose a DSCR lender

Choosing a DSCR lender that fits your specific requirements is an important part of the overall Airbnb financing journey. It’s a good idea to look for a lender that specializes in DSCR loans for Airbnb property purchases. Then check that the lender offers the loan terms and interest rates that would suit your investing strategy the best.

Lenders offer different interest rates and loan terms, so this decision is key for real estate investors to get the right Airbnb financing that suits their financial needs.

Step 4: Prepare your documents

Before applying for Airbnb financing, you’ll need to gather your financial and property documents. Make sure that you know the exact requirements from the lender, ahead of time, so that you can collate the right information.

Generally, lenders require the following documents: tax returns, bank statements, rental agreements, and property financial statements. The lender may also require a property appraisal and inspection report.

Step 5: Submit your loan application

Once you have gathered all the supporting documentation for your Airbnb financing application, you can go ahead and submit the loan application. Make sure that you supply detailed information about the property and its cash flow, as well as your financial situation, and future projections. Also, be prepared to give the lender any extra documents, should they ask for them.

Step 6: Await approval

Once you’ve submitted your application for Airbnb financing, it will be reviewed by the lender who will determine your DSCR (Debt Service Coverage Ratio) and go over all your documents before making a decision on the loan approval. DSCR loans typically have a quicker application process and a more streamlined review process.

Step 7: Close the loan

Once DSCR loans have been approved, lenders will provide an offer that includes the loan amount, interest rate, and repayment terms. If the terms suit your financial needs, you can accept the offer and then sign on the dotted line.

The lender may require some more documents at this stage, after which the funds will be issued to you, and you can purchase the Airbnb property.