The demand for short term rentals remains strong in 2025. Many real estate investors see Airbnb-style properties as more profitable than a long term rental. However, securing the right financing requires more than a traditional loan.
Banks often struggle to judge short-term rental income, but specialty lenders can fill that gap. Unlike mortgage loans for a primary residence, these investment property loans focus on the income potential of a vacation rental property.
This article explains how short-term rental loans work, what lenders look for, and how to qualify for them.
Short-term rental (STR) loans are designed primarily for vacation properties. Approval is based on projected nightly income, which can exceed standard monthly rent. Traditional banks often view these homes as risky, but STR lenders use more flexible criteria.
Traditional and STR loans look similar on the surface, yet their underwriting priorities are very different.
Traditional Investment Loans:
Short Term Rental Loans:
Investors can match loan types to project goals and timelines.
Lenders begin by evaluating your credit profile and cash position to assess risk. Their terms typically include the following:
Your track record matters, and more real estate experience typically earns better terms.
More specifically, a lender might look for the following:
Before issuing a loan, lenders confirm that the home itself can generate strong short-term rental income. For example:
Provide lenders with organized paperwork to speed approvals and prevent last-minute surprises. That paperwork might include the following:
Show lenders that you have stable funds and a clear financial picture.
These items prove the property’s value and short-term rental potential.
Legal paperwork protects both you and the lender.
Lenders use conservative numbers. Even in strong markets, they may assume 60–70% occupancy. They also study local competition and seasonal demand.
Vacation-rental income changes with the season. Peak months can bring in two to three times more than off-season months. Lenders want proof that you can cover payments during slower periods.
Most STR lenders allow 70–80% loan-to-value (LTV). Strong borrowers or standout properties may qualify for more.
Tourist hubs provide steady demand, while emerging markets can offer higher returns, along with higher risk. Aim for areas ranked among the best short-term rental markets when possible.
Every city sets its own rules, so review local laws before you buy. Factors to always keep in mind include:
A clear process helps you move from idea to funded deal quickly.
Here are typical hurdles borrowers face and possible quick fixes for each:
One common strategy is the BRRRR method, which stands for Buy, Rehab, Rent, Refinance, Repeat. This process involves purchasing a home with STR potential, improving it, building rental history, and then refinancing to extract equity, allowing for the process to be repeated.
STR income can swing with travel trends, seasons, and competition.
Local rules can change quickly (affecting your bottom line), so always check laws before closing.
A loan for vacation rentals like Airbnb is approved primarily on the property’s rental income.
Most lenders want a credit score of 660 or higher. Some real estate experience is preferred, but not a requirement.
Expect to put at least 20% down to secure funding.
Loan amounts typically range from $75,000 to $2.5 million, with potential higher amounts available for seasoned investors.
Common choices include DSCR loans, bridge loans, fix-and-flip loans, and portfolio loans.
STR loans rely on property income and require less paperwork. Traditional loans, on the other hand, rely on personal income and standard documents.
DSCR rates are around 6.50% to 8.50%, with loan terms from 6 to 18 months. However, rates for STRs might be higher, given the income uncertainty compared to long-term rentals.
Many specialty STR lenders can close in about two weeks, depending on experience, deal complexity, and documentation.
Groundfloor specializes in funding vacation rental property deals quickly and flexibly.
Key Benefits:
Competitive Advantages:
Short-term rentals can deliver strong returns, but success starts with the right loan. Understand the differences between STR and traditional financing options, know your property’s income potential, and gather solid documentation. Always select a loan type that matches your strategy, whether that is a fix-and-flip, bridge, DSCR, or portfolio loan.
Markets with strong demand and friendly regulations offer the best chance for steady cash flow. With proper preparation, you can close quickly and grow a profitable portfolio of vacation homes.
Have questions about your next move?