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Short Term Rental Bubble

Last updated: August 4, 2022

Private Lenders Have Stopped Originating DSCR Loans for Short Term Rentals

As of August 1, 2022: the institutional investors that purchase mortgage notes on short term rental investment properties have stopped buying. As a result, the private lenders that originate these loans, including OfferMarket Capital, have stopped lending.

What does this mean for STR investors?

If you're under contract to purchase an investment property that is intended to be a short term rental, your funding may well fall through.

Talk to your lender to find out if your loan may be affected. Reach out to other lenders that may still lend against STR properties. Consider switching to a long term rental strategy and loan program (12+ month lease) -- the economics may not make sense and the property may be designated rural and not qualify.

If you're in a hard money fix & flip loan, you may not be able to easily refinance out of your current loan.

Talk to your current lender about the possibility of extending your loan. Talk to lenders who may still offer DSCR loans for short term rentals. Consider the feasibility and merits of flipping (selling) the property if refinancing is no longer an option.

Short Term Rental Investing

The short term rental asset class ("STR"), is a developing asset class powered by the rise of Airbnb and pandemic-fueled travel trends. Like many new asset classes (i.e. crypto), there has been a lot of hype, a lot of speculation, and a lot of FOMO (fear of missing out).

Operating an investment property marketplace and private lending business, we have conversations daily with stakeholders in this exciting niche: STR investors, STR loan capital providers.

Short Term Rental Bubble

We started getting concerned about the STR market when the type of investor coming to us for DSCR loans for short term rentals switched from established, savvy real estate investors to bandwagon investors -- typically beginners with no experience and no business getting into the industry so late in the stimulus-fueled COVID economic cycle and housing boom.

Interest Rate for DSCR Loans for Short Term Rentals

Interest rates for STR loans tend to be about 1% to 1.5% higher than traditional DSCR loans for long term rentals. Review our DSCR Loan Interest Rate Index to track the prevailing interest rate environment.