March 21

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By Beau Eckstein

March 21, 2023


Are you a real estate investor looking to finance midterm rentals? In this post, we’ll discuss tips on how to finance these types of properties from Bo Eckstein, the host of the Investor Financing Podcast.

Investing in Midterm Rentals

Midterm rentals refer to furnished rentals that are usually occupied by traveling nurses, medical staff, and other professionals who are in the area for several months. These types of properties can be a profitable investment as they can generate two times the normal long-term rents.

However, financing midterm rentals can be challenging as conventional loans may not provide the maximum leverage possible, especially for light cosmetic fixers that need ten to thirty thousand dollars in repairs plus furnishings.

Bridge Loans

One option for financing midterm rentals is to use bridge debt. This type of loan allows you to borrow 80 to 90 percent of the purchase price and 100 percent of the repair costs, with the repair costs being held back and funded as progress is made on the construction.

The gross loan amount can exceed 75 percent of the after-repair value (ARV), which means that you can borrow up to 75 percent of the fixed-up value of the property. This is a great way to leverage your investment as long as you’re getting a good deal on the property and there’s equity when you fix it up.

Refinancing and Furnishings

Bo Eckstein recommends doing a 24-month term for the bridge loan, which will give you enough time to fix up the property and get it operating. This will also allow you to have proof of income for the refinance, which will make it easier to get approved.

As for the furnishings, you can get the vendor approved for equipment financing, such as buying furniture and TVs from a store like Ashley Furniture. This allows you to get 100 percent financing for the first few months, and you can leverage the 100 percent if the numbers work out.

Finding Value-Add Deals

The key to investing in midterm rentals is to find value-add deals that are close to hospitals or other medical facilities, which is where traveling nurses and medical staff are likely to stay. You can also use a projection-based loan if the property needs a lot of repairs but won’t qualify for a DSCR loan.

Ultimately, the best way to leverage your investment in midterm rentals is to do a bridge loan or a fix-and-flip loan for a longer term and then refinance out. This will give you more time to fix up the property and increase its value before refinancing.

Conclusion

Investing in midterm rentals can be a lucrative opportunity for real estate investors, but financing these properties can be challenging. However, with the tips provided by Beau Eckstein, you can find creative ways to finance your investment and maximize your profits.

Working with Beau Eckstein as your commercial mortgage advisor when trying to locate the best SBA financing can be beneficial because he has extensive experience and knowledge in the field. He can help navigate the complex process of obtaining SBA financing and assist in finding the best options for your specific situation.

Additionally, his established relationships with lenders can help increase the chances of getting approved for funding.

Overall, working with a knowledgeable and experienced advisor like Beau Eckstein can greatly increase the chances of successfully obtaining SBA financing.

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