Building a Ski Town Short-Term Rental Portfolio With Hard Money

Popular ski towns, like so many in Utah, offer investors plenty of opportunities to earn profits on short-term rentals. From slope-side condos to luxury chalets, ski towns offer some of the most attractive investments in the entire industry. But investing in ski town property is a high-risk, high-reward game. You need to know what you’re doing.

One of the biggest challenges in this particular market is investor competition. It is aggressive, to say the least. Any investor looking to get into popular skiing markets needs to be able to move quickly. That’s where hard money comes in. It is the investors’ secret weapon for speed.

Beating Cash-Only Offers

The big winners in popular ski towns have plenty of cash to spend. And if you are a seller looking to unload a ski-in/ski-out property, you are likely looking at a lot of all-cash offers. How does an investor who has to rely on financing compete?

Hard money is the answer. But before I explain how and why, it must be understood that all-cash does not necessarily mean a buyer will write a check on the spot. Investors are not carrying hundreds of thousands of dollars in cash around. Instead, they liquidate other assets before closing. It can take a few days.

A hard money offer competes nicely with cash because lenders like Salt Lake City’s Actium Lending can get to closing in 5-10 days on average. An even faster closing is usually possible if a deal’s circumstances call for it.

Actium once received a loan application on a Friday morning and was able to close the following Monday. Without getting into the details, Actium agreed to move so quickly because the investor would have lost both the deal and his earnest money had he not come through on time.

How They Pull It Off

You might be asking yourself how hard money lenders pull it off. First and foremost, their approval decisions are made based primarily on asset value. The asset being acquired – a short-term rental in a ski town, for example – acts as collateral for the loan. If the value were there, a lender could find a way to approve.

Because hard money lenders don’t have to run credit checks, look into debt loads, verify income, etc., the only real thing holding up funding is an appraisal. Moreover, lenders have multiple options forgetting appraisals done. Having an appraisal completed in a day or two is not unusual.

Yet another consideration is the limited amount of documentation a hard money lender needs. Just a handful of documents are submitted with the loan application. That’s it. A loan officer isn’t calling back every other day in search of new documents.

Not Scared by Seasonal Trends

Financing speed and easy loan access are the primary reasons hard money is a better deal for acquiring short-term rentals in vacation destinations. But consider the fact that hard money lenders aren’t scared away by the seasonal nature of short-term rentals in popular ski towns. Banks are.

A bank will look at a property as a potential liability during the transition between ski and mountain biking seasons. The property becomes a liability because it generates less revenue during seasonal changes. But hard money lenders aren’t concerned about seasonal trends or revenues. They only care about the value of the asset.

Investing in short-term rentals is a good way to make money on property. When those rentals are located in popular ski towns, the opportunity for big profits is there. Fortunately, smart investors have access to hard money that makes winning deals a lot easier.