Financing an AirBnB Property

I’m thinking about buying a property to list on AirBnB full time. I currently live at home with parents so I don’t have a mortgage. It would be easiest for me to get a loan for a primary residence… but does that work? Does it matter what kind of loan I have and the business/business expenses? I’m guessing I have to live there, on paper at least, so therefore all my expenses won’t qualify as business expenses.

Do you know of any lenders that will lend to AirBnB hosts or for investment real estate at a good rate?

@vicnbie - It would be really helpful if you told us where you are located.

I also strongly encourage you to put together a complete business plan to understand what you can truly afford. Investing in a lodging for the sole purpose of renting it out over AirBnB is risky for lots of reasons.

We bought a retirement home a few years ago with the intention of renting it out when we were not there. But before we took out the mortgage and completed the purchase, I made sure we could pay for it even if no one rented it out at all. We’ve been lucky to make enough to cover the mortgage and the other expenses of ownership, but we’re not making a lot of money above that.

No, they hardly lend to people who live in their homes! :joy:

Just kidding… but what you are talking about is rental property or investment property and that comes at a different rate.

I think you would be better served starting out slow. Why not just buy a condo or something smaller to get started? Rent out a room or two to get the hang of it.

A home has a lot of maintenance and other responsibilities that go along with it. Taxes, insurance, repairs, appliances and all that.

As someone once wisely noted — when you go to sign your escrow documents, keep your checkbook out! The check writing (debit card use) never ever ends!

AirBnB have a list of US lenders on their web site.

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Thanks for your help! I’m in Texas. And yes, it will be affordable without any income. (since I do not have any debts and plan to buy a condo, I’ve been pre-approved previously for a certain amount but didn’t end up purchasing, so I plan to purchase something cheaper. Just worried about tax implications).

I wanted it to be purely AirBnB for the sake of “simpler” taxes since I don’t have a need to move out and work a rental. Just thought it would be cleaner since everything would be a business expense.

IRS doesn’t care what your mortgage product is. Mortgage fraud is another matter if you cloose a owner occupied mortgage and don’t plan to live there. FANNIE/FREDDIE investment property loans are usually 50-100 bps higher in rate. And require 25% downpayment.

If I was you, I would get an owner occupied mortgage and live there for 6 months. Then start Airbnb.

I’m not sure what you mean by simpler taxes. Usually home ownership involves more conplicated taxes and filing the long form where you can deduct all sorts of things. Property tax, mortgage interest, etc. Of course the tax cut thing may change all that, I’m totally not sure.

Also, your cpa may not advise you to file a schedule C (business income) but rather, schedule E (passive income from a rental) . That is what I had to do.

Bottom line, owning a home doesn’t usually make for simpler taxes, but it does usually improve your tax situation.

Income property requires 25% down, but most lenders can do it. If you plan to live on the property ( say find a duplex) then you can do the first time home buyer programs with like 5,% down. You then have to live there 3 years. And taxes are not that different either way. Just have one bank account and credit card for personal use, abd one account and card for the Airbnb.

@vicnbie -
I know this is not exactly answering the question you have, but I highly suggest you figure out whether this will be your home that you rent out on the side or a property you buy as an investment in order to rent it out. If it’s the first, there’s a good chance a standard mortgage would be fine. If it’s the latter, then you’ll most likely need a commercial property.

The taxes will be much more complicated than just standard income taxes no matter which way you go. If you choose to live there and rent it out, you’ll have to divide the expenses between personal and “business”. If you buy it to rent, then I suggest you place the property into a business (an S-corp or an LLC are two common choices), and then all the expenses are deductible. But you’ll need to keep books for the business, including a balance sheet, etc.

Please consult someone like a CPA or a business advisor before you go down this path of buying for the main purpose of short-term renting. My day job is in developing business plans and reviewing the financials for a Fortune 10 company in Houston, and I find the tax laws challenging to understand. (Our home is in an S-corp, and I do our taxes.)

Good luck!

Thank you @PitonView! That was an insightful answer. :slight_smile:

When you apply for a mortgage for a primary residence you will have to state that you intend to live there. I sold a house to a lawyer who had me (real estate broker) check the box that he was intending to occupy as primary. I said are you sure you are going to live there? His answer was intentions can change.


Hey, that’s what law school is for!

I had to write a love letter to my mortgage lender, not just check a box, about buying a second property as a personal residence, citing reasons about my intentions (in vicinity of family, etc.). It is truly a pied a terre for me, family and friends, but I will wait a year before considering doing occasional short term rentals there.