Are you looking to finance an investment property but don't have income documents? This is a common scenario for real estate investors who use short-term rentals or Airbnb as a source of income. In this blog post, we'll discuss how to finance investment real estate without income documents and provide you with some options.
Two-Year Stabilized Bridge Loan
One of the best options for financing investment real estate without income documents is a two-year stabilized bridge loan. This type of loan is ideal for short-term rentals and allows you to use new appraised value after six months of ownership. You can achieve 70 to 75 percent of the property's value, depending on your credit score and loan-to-value ratio.
Using this type of loan, you can furnish the property if it isn't already furnished and run it as a short-term rental for 12 months. Once you've owned the property for 12 months and have rental income, you can refinance into a 30-year fixed or a seven-year ARM. This will give you more financing options and help you avoid dealing with a debt service coverage ratio (DSCR).
Pros and Cons of a Two-Year Stabilized Bridge Loan
One of the advantages of a two-year stabilized bridge loan is that it allows you to finance an investment property without income documents. This is especially helpful if you're using short-term rentals as a source of income. Additionally, this type of loan allows you to use new appraised value after six months of ownership, which can help you avoid waiting 12 months for a refinance.
However, there are also some disadvantages to consider. For example, a two-year stabilized bridge loan typically comes with higher interest rates and prepayment penalties. Additionally, you'll need to furnish the property and run it as a short-term rental for 12 months, which can be a challenge for some investors.
Other Financing Options
If a two-year stabilized bridge loan isn't the right option for you, there are other financing options to consider. For example, you could look into hard money loans, which are based on the value of the property rather than your income. Hard money loans typically come with higher interest rates and shorter loan terms, but they can be a good option if you need financing quickly.
Another option to consider is private money lending. This involves working with an individual investor who is willing to lend you money based on the property's value. Private money lending can be a good option if you have a strong relationship with the investor and can negotiate favorable terms.
Final Thoughts
Financing investment real estate without income documents can be a challenge, but it's not impossible. A two-year stabilized bridge loan is one of the best options to consider, especially if you're using short-term rentals as a source of income. However, there are also other financing options to explore, such as hard money loans and private money lending. To determine the best financing option for your investment property, it's important to speak with a qualified real estate professional.