A Guide to Financing Short-Term Rentals

Last updated on August 16th, 2023

Financing short term rentals

Short-term rental properties can be excellent investments that can help generate a smooth flow of income. In fact, Airbnb recently shared that Airbnb hosts around the globe have earned over $21 billion for the first half of 2022. Yes – that’s just for the first half of the year!

You might have also heard that there’s consistent demand for short-term rentals. And this is where potential investors ask the question: How can I finance my short-term rental property?

This article will guide you through the process and feature experts’ options for STR financing. Because let’s face it – there can be a long list of Airbnb host expenses

There are several ways to finance your short-term rental – whether it’s your first time investing or are looking to start your second property. Excited to learn more about it? Continue reading!

What is Short Term Rental Financing?

Financing short-term rental is an alternative for property investors who want to loan money for their short-term rental properties. The most common STR financing for others is private loans. But there are various kinds of short-term investment property loans 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. Some of the best hard money lenders are Kiavi 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. 

Let’s imagine that you have a certain amount of money – enough to cover the price of the property and the basic costs of ownership. Most investors feel confident that they won’t need a lot of cash reserves since the business started anyway. So they assume that it’s enough to cover the recurring expenses. It’s a costly mistake!

Not having enough cash reserves will limit your budget for furnishing, inability to cover the mortgage for at least 6 months, and unprepared for other costs.

Top 10 Short-Term Rental Lenders

Short-term rental loans can be a hassle but it shouldn’t be too difficult to apply for one. We filtered the following vacation rental lenders for easy viewing:

1. Host Financial

Host Financial is one of the leading short-term rental lenders in the market. Built to support the vacation rental market, they offer both short and long-term financing. 

Host Financial does not require leases, tax returns, W2’s, DTI, or personal income when applying for a short-term rental loan. To begin with your application, you will need to fill out and submit a form.

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. American Heritage Lending

Known as a national lender that specializes in Non-QM and Residential Transitional Lending, AHLend is focused on hard money financing for real estate investors.

As seen on their website, a property investor can loan an amount of $75,000 to $2 Million. The payment terms are 5 & 7-year ARM and 30-year fixed-rate rental loans in American Heritage Lending.

4. Strong Hill Capital

Strong Hill Capital provides commercial, consumer, and residential loans for real estate investors and buyers. They offer a full spectrum of loan programs according to your preference with lesser paperwork.

5. Coast 2 Coast Mortgage

Coast 2 Coast Mortgage offers debt consolidation, mortgage services, refinancing properties, and mortgage services for residential and commercial properties. 

According to their website, their loan parameters are up to 80% LTV financing on a purchase with loan terms of 30 & 40 years (interest-only options). If you already have an existing property, you can fill out the form below and their support team will contact you:

6. KRAM Capital

KRAM Capital is one of the leading independent lending firms which caters to commercial and real estate loans. Aside from multi-family and bridge loans, they offer short-term rental financing for new and seasoned investors. The minimum loan amount that KRAM Capital offers is $200,000.

7. Make A Beeline

Beeline offers a simple application flow but it isn’t recommended for beginners. This is because Beeline’s STR financing is based on your property’s rental income (DSCR or commercial-rental specific loans). So if you don’t have a primary property yet – there are other options to look out for!

Some of the requirements include havig a minimum credit score of 640, 12 months’ worth of projections, and actual historical STR income among others.

8. VISIO Lending

Known as the nation’s premier lender for buy & hold investors offering, VISIO Lending also offers vacation rental loans. This company only requires simple documentation with no personal DTI or tax returns.

9. RCN Capital

RCN Capital is a private and direct lender company that offers 30-year loans with 7.30% rates for short-term rental financing. They also offer to finance long-term rentals and new construction.

10. Tidal Loans

Tidal Loans offers various types of loans including hard money and investment property loans. Although they cater nationwide, their lending areas are not available in certain states such as Nevada, California, and Arizona among others. 

Vacation rental financing rates at Tidal start at 3.5% with no income verification needed. The minimum amount you can loan ranges from $75k to $2M, depending on your property type.

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! It’s highly recommended to chat with mortgage brokers who understand the local real estate market. 

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. Easy Approval for Short Term Rental Financing

Lenders go through your financial position and consider your debt-to-income ratio and cash reserves before approving your loan application. 

In order to get easy approval for STR financing, you have to check your FICO credit score and keep a low debt-to-income ratio. You may also need to save some extra cash reserves and consider ways to improve your credit score!

3. Research for Great Investment Deals 

To make sure that 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 best neighborhood by obtaining reliable Airbnb statistics. This way, you will understand the existing market and demand, and will be able to even predict your revenue.

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!


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