About The Deal

This featured deal in July is a 5-bedroom, 4-bathroom beach house located in Panama City Beach, FL. The local real estate investor initially purchased this property for $500,000 in 2023 and invested an additional $125,000 in renovations over the following 12 months. Despite a sale falling through at the closing stage, the investor decided to hold the property as a short term rental and reached out to Ridge Street Capital to see if they could pull some of their equity out of the property to with a cash out DSCR Loan.

Why This Was a Special Deal

1. Short-Term Rental with Minimal History: The property had less than one month of rental history on Airbnb, which typically poses a challenge for securing financing for most lenders. Most Lenders require 6-12 Months of rental history in order to provide a DSCR Loan on short term rental properties.
2. Valuation Above Market Median: The property was appraised at $1.085 million, exceeding the median home price of similar properties in the area by over 20%.
3. Time-Sensitive Closing: The client had a strict timeline for closing the cash out refinance within 30 days due to upcoming international travel plans.

How Ridge Street Evaluates Short Term Rentals

We understand the unique potential and challenges of short-term rental properties. Unlike most investment property lenders who require extensive rental history, we use realistic rental projections which account for short term rental vacancy and operating costs such as property management fees, heating/cooling, water, electric, etc.

For this deal, we utilized AirDNA’s projected cash flow metrics which is free to access and also allows our clients to check their projected monthly cashflow independently.

For Short Term Rentals, we also place a significant weighting in our financing on the DSCR of the property. Ridge Street only lends on properties with positive cashflow (DSCR > 1.0) and we adjust our pricing to be most favorable for Short Term Rental Properties With a DSCR > 1.25.

In the case of this featured deal, the projected DSCR was 1.51 so we applied the maximum rate discount for favorable DSCR loans.

Learn more about DSCR Loans For Airbnb.

The Result

The successful cash-out refinance provided the client with the following Loan Terms:

• A $600,000 30YR Fixed Rate DSCR Loan (Cash Out)
• At a Rate of 7.35%
• Using the projected cashflow of the property rather than the rental history
• An on time closing within 30 days

More About Ridge Street Capital

Ridge Street Capital specifically focuses on providing investors with access to capital to acquire, renovate, build, and hold real estate. Partnered with local real estate investors across 35 US States, we’re changing the way real estate investors finance their projects.

If you’re interested in lowering your cost of borrowing or improving your borrowing experience, we’d love to work with you.

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