Investing in rental properties has long been a wealth-building strategy, but traditional long-term rentals often limit cash flow due to market rates, vacancies, and single-tenant risks. Enter PadSplit, a unique coliving model designed to maximize rental income while providing affordable workforce housing to meet growing demand.
Unlike traditional coliving spaces that cater to short-term or luxury renters, PadSplit operates as an affordable, long-term shared housing solution where residents rent private, furnished rooms in a shared home with weekly payments, no deposits, and all utilities included. For investors, this means higher occupancy rates, lower turnover, and up to 30% higher returns compared to standard rentals.
PadSplit properties offer real estate investors an opportunity to generate strong rental income while providing affordable housing solutions. Here’s what you need to know about financing these coliving investments.
Investor success story: How one PadSplit property generates 2X market rent
Take the case of Peter Pasternack, a lead character from A&E’s “Flip This House” and a successful real estate investor in Atlanta, Georgia, who converted a rental property into a PadSplit. With Airbnb, he was earning $2,500 per month in rent. However, after converting it into a coliving duplex, his monthly revenue increased to $4,600.
Why more investors are turning to coliving
Here’s what makes PadSplit properties an attractive investment opportunity:
Higher Returns – 30% higher returns compared to traditional rentals.
Strong Demand – Consistent demand due to affordable housing shortage
Operational Flexibility – Flexible management to maximize profits
Now, let’s explore how to secure funding.
Top loan options available for PadSplit coliving properties
1. DSCR Loans: The go-to option for coliving investments
DSCR loans are popular for financing co-living properties since they focus on the property’s projected income rather than your personal earnings. These loans are specifically designed for investment properties like PadSplit homes.
Down Payment: Typically 20-25% of the purchase price.
Loan Approval: Lenders evaluate if your projected rental income will be sufficient to make monthly mortgage payments.
Best For: Property investors whose expected rental income exceeds personal earnings
Down Payment Options for PadSplit Properties
You can fund your down payment through personal savings or by leveraging home equity through a HELOC.
2. Hard money loans: Quick but costly capital
Hard Money Loan Considerations
Hard money loans offer quick financing for property purchases and renovations, making them suitable for converting homes into PadSplit spaces. However, these loans come with 8-12% interest rates and short 6-24 month terms.
Best for experienced investors who:
- Need rapid funding for properties requiring renovation
- Have a clear strategy to refinance into a DSCR loan after stabilization
3. Reducing risk through strategic partnerships
For first-time PadSplit investors, partnering with experienced professionals offers significant advantages:
Strategic Benefits
- Split costs and share expertise through joint ventures
- Access reliable market data for informed decisions
- Leverage established contractor and vendor networks
Tip: Consider connecting with PadSplit’s team to explore financing partnerships and identify promising markets. Their experience can help guide your investment strategy.
4. Test the waters: Lease-first strategy
Consider leasing before buying to explore PadSplit’s potential with lower risk:
- Start with a 2-year lease to evaluate the co-living model
- Avoid large down payments while testing market viability
- Maintain flexibility with traditional rental backup options
While you might face small monthly losses if performance falls short, this approach limits exposure compared to direct property ownership.
Potential Lenders for Financing a PadSplit Property
Finding the right lender is essential for successfully financing your PadSplit investment. The following lenders specialize in DSCR loans, hard money loans, and other financing options suitable for coliving properties:
National Lenders
- Visio Lending (Mike Santos, Preferred Lender) focuses on DSCR loans for real estate investors
- Easy Street Capital provides flexible loan options for rental property investors.
- Homebridge Financial Services offers investor-friendly financing solutions with competitive DSCR loan programs.
Regional and Specialized Options
- Cassidy Corella has built a strong reputation, offering various real estate investment loan products.
- Georgia investors can work with Craft Bank, which specializes in local market financing solutions.
Technology and Portfolio Lenders
- Vontive streamlines the process through automated underwriting for real estate investment loans.
- Velocity Mortgage Capital provides DSCR loans and rental portfolio options.
- Civic Financial specializes in private lending solutions, including fix-and-flip and rental property loans.
Alternative financing strategies
Smart investors recognize the value of exploring diverse financing paths beyond conventional loans. Here’s a comprehensive look at alternative ways to fund your PadSplit investment.
Seller financing
Working directly with property owners can create mutually beneficial arrangements. This approach offers:
- Flexible down payment and interest rate negotiations
- Reduced closing costs and paperwork
- Faster closing timelines without traditional bank requirements
- Opportunity to build relationship-based investment partnerships
Retirement account strategies
Self-directed IRAs provide a powerful vehicle for real estate investment:
- Tax-advantaged real estate purchases within retirement accounts
- Ability to diversify retirement portfolios beyond traditional assets
- Option to combine IRA funds with other financing methods
- Potential for tax-deferred or tax-free returns depending on account type
Collaborative funding approaches
Modern investment platforms and partnerships expand financing possibilities:
- Real estate crowdfunding platforms connect multiple investors
- Private lending arrangements with experienced real estate investors
- Joint venture partnerships to combine resources and expertise
- Syndication opportunities for larger-scale investments
Each financing strategy carries unique advantages and considerations. Success often comes from matching the right financing approach with your investment goals, timeline, and risk tolerance.
Managing investment risk in PadSplit properties
When considering a PadSplit investment, understanding and addressing potential risks is crucial for long-term success. Let’s explore key concerns and practical mitigation strategies.
Occupancy management
High demand for affordable housing typically drives strong occupancy rates in PadSplit properties. However, prudent investors should:
- Build financial models using conservative vacancy estimates that account for market fluctuations
- Regularly assess local market conditions to maintain competitive weekly rates
- Implement professional property management practices, including thorough member screening and responsive maintenance
- Maintain property quality to encourage longer stays and positive member reviews
Regulatory compliance
Each jurisdiction has unique requirements for shared housing. To ensure compliance:
- Research local zoning laws and housing regulations before property acquisition
- Engage qualified real estate attorneys familiar with shared housing regulations
- Connect with experienced PadSplit investors in your target market
- Stay informed about regulatory changes that could affect your investment
Financial planning
Understanding the cost structure helps create realistic profit projections:
- Fixed costs include property taxes, insurance, and regular maintenance
- Variable expenses cover utilities, cleaning services, and member turnover
- Weekly payment model provides consistent cash flow and helps offset operating costs
- Lower turnover rates compared to traditional rentals reduce vacancy-related expenses
- Emergency fund maintenance ensures resources for unexpected repairs
When managed effectively, these potential challenges can be transformed into opportunities for sustainable returns while providing essential affordable housing solutions.
Choosing your right financing path
The right financing approach for your PadSplit property depends on your investment goals and risk tolerance. Consider these options:
- DSCR loans provide stable long-term financing based on rental income potential
- Hard money loans enable quick purchases and renovations at premium rates
- Strategic partnerships offer shared resources and expert guidance
- The lease-first strategy allows market testing with minimal upfront investment
Ready to explore PadSplit investments? Connect with our team to discuss financing options and develop your investment strategy. Visit PadSplit.com today.
