Last updated on September 4th, 2023
Airbnb financing options
Key Takeaways
- There are several Airbnb financing options that most property investors take advantage of. Purchasing an investment property will help you prepare to welcome revenue, but also spend on initial & recurring costs.
- Discover the top 10 short-term rental lenders in the Australian market and excellent strategies to qualify for a loan. We also threw out some expert tips to determine your property’s profitability.
Introduction
It’s a fact that investing in a short-term rental property can generate an enormous flow of income. As the summer travel trends in Australia are in constant demand, Airbnb is expecting more revenue from hosts. It also explains why more hosts are joining the community!
Other investors have their mortgages and personal savings ready, but what if you only have enough money? Or just because you have the initial costs covered, doesn’t mean you should worry less about other Airbnb host expenses. Having no cash reserves is one of the major mistakes that other investors make.
This is where Airbnb financing options are offered at the table. Only a certain amount of money will come out of your pocket, and the rest will be backed up by lenders. So how do you choose among the best options? This article will guide you through, so continue reading!
What is Short-Term Rental Financing?
Short-term rental financing is a popular alternative for property investors who want to loan money for their Airbnb properties. The most common STR financing for others is private loans. But the good news is that there are various kinds of loans for short-term rental investments that you can take advantage of:
- Hard money loans
Hard money lenders usually have flexible guidelines. They also have the highest interest rates in the market with approximately 1-3 years of payment terms. The best hard money lenders in Australia are Credit Connect Group and RCN Capital.
- Conventional bank loans
If you have a high income that’s enough to support the new mortgage payments, this type of loan is ideal for you. Conventional bank loans offer the lowest rates in the market. Since this is similar to a mortgage for your primary property, it may not be suitable if you want to purchase multiple properties.
- Commercial rental-specific loans
Also known as the Debt Service Coverage Ratio (DSCR) loan, this kind of loan will depend on your property’s projected income.
Top 10 Short-Term Rental Lenders
Financing short-term rentals shouldn’t be too stressful. Luckily, there are plenty of options available! Check out the best short-term rental lenders in Australia:
1. Home Loan Experts
Home Loan Experts is a mortgage broking firm that offers free assessment and finance properties anywhere n Australia. Not only will they help you finance your property, but they can also help find the most suitable home loan deals.
Property investors who have tried Home Loan Experts also have several positive reviews for its services as seen on Product Review AU. They also offer services such as refinancing and construction loans among others.
2. Lima One Capital
Lima One is a mortgage finance company that provides customized real estate loans. They also set the standard among hard money lenders for fix & flip and rental property financing.
As seen in New Silver’s review, Lima One Capital’s loan products have various requirements. They are also required to have a minimum FICO score of 600-700, depending on the borrower’s portfolio.
3. Funding
Funding is one of the leading finance companies in Australia that offers short-term property loans with simple requirements and easy settlements. Their interest rate and fees vary according to your loan needs and offer 1 to 36 months loan terms.
4. Macquarie
Macquarie offers various home loan options for all permanent residents of Australia. They are also transparent with their principal and interest repayments for both owner-occupied and investment property rates which can help you properly decide.
5. Quantum Credit
Quantum Credit offers short-term investment loans, property development finance, business expansion, and more. This Perth-based company also has flexible funding for business loan terms of up to 24 months with possible extension.
According to their website, you can borrow from $100k up to $4 million. To know about the requirements, you’ll need to fill out the form and let them know if you have equity in your properties.
6. Diverse Funding Solutions
Diverse Funding Solutions are private lending specialists that offer short-term property loans with low documentation requirements. If you are a self-employed investor with no regular income, DFS is highly recommended!
7. XCEDA Capital
Known as one of the leading short-term property lenders to Australian businesses. XCEDA offers to finance renovation, bridging finances, property investments, and more. Their interest rates start from 8.95% with flexible terms from 6 to 36 months.
8. Greater Banck
Greater Bank provides ultimate investment home loans to make investing in short-term rentals easier. According to their website, their interest rates start at 5.54% with no establishment fees and flexible repayment options and loan terms.
9. NSW Mortgage Corp
NSW Mortgage Corporation is dedicated to assisting small to medium businesses and various kinds of loans and services – particularly investment property loans. They offer variable, fixed, and interest-only investment property loans with a free consultation.
10. Aussie
Aussie is one of the nationally recognized lenders in Australia. They offer home loan experiences, particularly for investment properties. Aussie offers expert insights and even a free property report which includes value estimates and past sales among others.
3 Expert Tips on Short-Term Rental Loans
Here are some short-term rental financing expert tips that you can use:
1. Speak with Mortgage Brokers & Lenders
Before you decide which lending company works best for you – research first! Chatting with mortgage brokers who understand the local real estate market is highly recommended.
There are various loan terms and conditions that you may not know of and are worth exploring before making a decision.
Pro tip: You can also ask for help with arranging mortgage application documents in advance. The lender will get the impression that you are keen to invest in the real estate industry.
2. Check The Short-term Rental Regulations
Short-term rental rules are subject to change depending on your location. For instance, if your target property is nearby tourist attractions, then short-term rental rules are more likely imposed already. However, if it’s located within a private neighborhood, it’s best to double-check with the local city hall to confirm if there are new regulations.
Before finalizing your decision on purchasing a property, it’s highly recommended to check the short-term regulations first to worry less. You can also speak with local real estate agents to find out more information.
3. Research for Great Investment Deals
To ensure you’re raising capital for a profitable property investment, do your research first! Financing Airbnb properties can come next after discovering excellent investment deals.
Using a short-term rental analytics tool will help you find the most profitable short-term rentals. At the same time, you will also understand the existing market and demand and even predict your revenue. This way you can find the best markets to start your Airbnb business in Australia.
Conclusion
Now that you have a brief overview of Airbnb financing options and the best short-term rental lenders in Australia, take the next step! It’s important to make sure that you’re investing in the right property.
While there are several banks that lend approve loans to Airbnb, it’s still a costly mistake to have your eye on the wrong place.
With the help of an Airbnb profit calculator, real estate investment goes to the next level. You can estimate your revenue potential, discover emerging markets, and make the wisest investment decisions!
