Your Master Guide to Short-Term Rental Property Loans

As moms, medical professionals, and entrepreneurs, we have it tough. 

Life isn’t going to just throw you money and success, and sometimes no matter how hard you work, it seems like you’re just spinning your wheels.

That’s why so many of us decided to change the game. With luxury short-term rental (STR) properties, I now control my life, and you can too. You can make money you never thought possible, and more importantly, you can live the way you want. It’s your schedule, so why not make it legendary? Your time. Your financial and lifestyle freedom.

Whether new to STR investing or a seasoned veteran, you will always need financing. I’ll show you how to unlock the perfect financing options for your needs and goals. 

Let’s go!

Understanding Luxury Short-Term Rental Property Loans

Rental Property Loans: First off, let’s cover the basics. Are you curious about the lucrative potential of luxury rental investments but lack, like, all experience? Don’t stress a thing! 

A short-term rental property loan is simply a type of loan that investors can use to purchase a property they plan to rent out on a short-term basis, such as through Airbnb, VRBO, or HomeAway. These loans typically have a term of one to five years and may require a higher down payment than a traditional mortgage.

A lot of the terms hinge on how much financing you need.

So… How Much Can You Borrow?

Are you already facing big-time student loans, a mortgage, and other expenses? Hesitant about the idea of taking out even more money? 

The good news is, it all depends on what you want and need. And believe me when I tell you, a well-managed luxury short-term rental more than pays for itself! The amount you can borrow for a short-term rental property loan varies depending on the lender, but it typically ranges from $75,000 to $1 million or more. The loan-to-value (LTV) ratio for these loans is usually around 75%, meaning 25% of the purchase price as a down payment.

What Are Rental Loan Terms and Conditions?

STR loans come with different terms and conditions depending on the lender. However, here are some common ones to expect:

• Interest rates: The interest rates for these loans are typically higher than traditional mortgages, with rates ranging from 5% to 12%.
• Loan term: As mentioned earlier, the loan term for these loans is usually one to five years, which means that the borrower must pay back the loan in full within that time frame.
• Down payment: The down payment for a short-term rental property loan is usually higher than a traditional mortgage, with a minimum of 10% of the purchase price.
• Credit score: To qualify for a short-term rental property loan, borrowers typically need a credit score of 620 or higher.
• Property type: Lenders may impose restrictions on the type of property you can finance with a short-term rental property loan, such as requiring the property to be in a particular location or meet specific standards.

Why Choose a Short-Term Rental Property Loan?

Investing in short-term rental properties can be a lucrative way to diversify your investment portfolio, and a short-term rental property loan can make that possible. Here’s another little bullet-point list to show you why STRs can be sooo rewarding.

• Flexibility - These loans offer more flexibility than traditional mortgages, allowing you to purchase a property you plan to use as a vacation rental or Airbnb.
• Higher returns - Short-term rental properties can generate higher rental income than traditional long-term rentals, meaning you get more passive money in your pocket.
• Diversification - Investing in short-term rental properties can help diversify your investment portfolio, reducing overall risk.
• Tax benefits - Owning a short-term rental property can provide tax benefits, such as deductions for mortgage interest, property taxes, and depreciation.

One of the best benefits of taking out STR property loans is the potential for big-time cash flow. Before you know it, you’ll achieve financial freedom and reduce your dependence on that draining 9-5 (or 9-9) job!

You’ve Got Options! Finding the Perfect Short-Term Rental Property Loan

I have been fortunate to have spectacular success with short-term rental properties, but it took a little learning. One of the main lessons is the importance of appropriate financing. Luckily, there are different types of short-term rental loans available for investors. Let's dive into the eight most common types and find the best for you.

(1) Unlock the Door to Luxury with Just 10% Down - Your Second Home Awaits!

Are you dreaming of that exquisite luxury rental but feeling stuck on the down payment? 🏠✨ Well, your dream just got closer with our 10% Down Second Home Loan. It's my all-time favorite, and it's your ticket to an elite real estate experience with just a fraction of the cost.

Forget the myths - the interest rates are not sky-high! With the right credit score, they can even be quite attractive. Picture yourself in your own slice of paradise, a luxury rental for vacations or a revenue fountain. Lower down payments mean these dreams are not just wishes anymore; they're your new reality!

(2) DSCR Loans: Make Your Property Dance to Your Tune - Maximize Earnings!

Investors, listen up! 🏢💰 My next favorite, the DSCR (Debt Service Coverage Ratio) loan, is like your property's best dance partner. Unlike the old-fashioned loans that cling to personal credit, DSCR loans groove to your property's income rhythm.

Yes, a 20%+ down payment might be there, and interest rates may shimmy a bit higher. But focusing on the rental income over personal credit? That's a move that makes many investors swing! If your property has the beat of strong rental income, a DSCR loan can turn that into a revenue symphony. Let your property dance for you!

(3) Bank Statement Loans: Your Self-Employed Heart's Desire - Invest in STR Property!

Self-employed friends, we know the loan world can feel like a tricky dance floor. 💼💃 But here's the Bank Statement Loan, tailored just for you, stepping in like a perfect dance partner. Forget the usual credit hoops; it's your bank statements that lead this waltz.

What's in it for you? More room to move, more chances to shine, and a loan process that truly gets the beat of your business. Interest rates might vary, but the focus on your cash flow over old-school credit checks means opportunities that other loans can't even see.

Bank Statement Loans embrace your entrepreneurial flair. They don't just look at the W-2; they see the whole show: your business's financial health and its star potential. If you're self-employed and eyeing that luxury short-term rental property, this loan might just sweep you off your feet! 🌟

(4) Take Your First Big Step With Bridge Loans

Need a loan fast before someone else swoops in? That's where bridge loans come in. 

Bridge loans are short-term loans that provide interim financing until more permanent financing solutions can be secured. They help real estate investors who need quick access to cash for investment opportunities.

Bridge loans are truly your link to a brighter future!

Build Your Bridge to a New Life  

Bridge loans typically range from $100,000 to $10 million, and the amount is contingent on the creditworthiness of both lender and borrower. The interest rates on bridge loans are typically higher than traditional loans, ranging from 8% to 12%. The loan term is usually around 6 to 12 months, with the option to extend the duration for an additional fee. Borrowers usually need a credit score of 620 or higher to qualify, and a down payment of 20% to 25% of the purchase price is required.

(5) Going Hard Is Easy - The Benefits of Hard Money Loans

Hard money loans are short-term, asset-based loans secured by the value of the property purchased. This means that hard money lenders are more interested in the value of the purchased property than the borrower's credit score.

Hard money loans typically range from $50,000 to $10 million, with interest rates higher than traditional loans, from 8% to 15%. The loan-to-value (LTV) ratio for hard money loans is usually up to 70%, meaning the loan amount can be up to 70% of the property value.

Putting That Hard Money to WORK

The loan term for hard money is usually around six to 18 months, but you can always lengthen that if you’d like. Borrowers typically need a credit score of 550 or higher to qualify.

Of course, before you pursue any financing, you need to ensure your investment property is the cream of the crop!  

With my Curated Luxury Short-Term Rental List, you can save untold hours researching, stressing, and being lost in uncertainty.

(6) Turns Out, Conformity Can Be Your Friend

Conforming loans, or conventional loans, are simply mortgage loans that meet the guidelines set by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac. These loans provide affordable financing to borrowers like you who want to buy homes or investment properties.

Need a decent chunk of money for that luxury property investment? In 2023, the maximum baseline loan amount for a single-family home is $726,200. Of course, this is a baseline and varies by state.

Why Consider a “Conventional” Solution?

First off, those pesky interest rates! 

Conforming rental property loans: 

These loans have lower interest rates than other types of loans and also higher loan limits, which means you can borrow more money to invest in your rental property.

If this is your first investment rodeo, you’re in luck. It is easier to qualify for a conforming loan even if you have less-than-perfect credit, and with a range of flexible repayment terms, you can choose the option that works best for your financial goals.

(7) Tailored Financing Solutions for Real Estate Entrepreneurs 🏡💰

The world of luxury short-term rentals is brimming with opportunities, but the right financing solutions are key to truly thriving. Tailored specifically for real estate entrepreneurs with experience and cash-flowing STRs.  Whether you're eyeing that next luxury property, looking to renovate, or aiming to grow your luxury mid-term rental arbitrage business, these options provide the funds you need without giving up ownership, all while retaining complete control of how the money gets spent.

(8) Honoring Service With a VA Multi-Unit Financing

You have an intense career, a filled-to-the-brim schedule, and a family to feed. If you burn the midnight oil in the medical field - or just with mothering - I’m guessing you aren’t an active-duty military member! 

But are you a veteran or is your spouse involved?

Backed by the U.S. Department of Veterans Affairs (VA), this loan type is offered by mortgage brokers and traditional lenders. The best part is, there is no minimum down payment or credit score. You can even buy up to seven units (but you must live in one). 

Although this is not a typical option for investors in luxury single-family properties, with a little creativity and savvy asset management, you can make it work. I can show you how to perfectly market and manage your investment property with an AirDNA Membership. You will be shocked by how easy making massive profits can be!

(5) Practical and Accessible FHA Multi-Unit Financing 

As a would-be investor in short-term rentals, you want financing options offering flexibility, affordability, and ease of access. When you lack the financial resources to purchase a property outright, consider FHA multi-unit loans. 

To qualify for an FHA multi-unit financing loan, you must meet certain criteria. Ensure you have a credit score of at least 580, a debt-to-income ratio (DTI) of no more than 43%, and a down payment of at least 3.5% of the short-term rental purchase price.

With luxury short-term rentals, you can sometimes generate 10 times the revenue of long-term investment properties. Pretty amazing, right? Especially when you can use your rental income from a property to qualify for an FHA loan. 

This makes it a lot easier to qualify for a larger loan!

(6) Spruce Up Your Portfolio With… Portfolio Loans!

You’ve probably heard it a million times before. Diversify your portfolio, diversify your portfolio. When you need financing for that potentially lucrative luxury rental, consider portfolio loans.

Portfolio rental property loans:

These mortgages are held by lenders, such as banks or credit unions, instead of being sold to third-party investors. This means that the lender is taking on the risk of the loan rather than passing that risk onto someone else. As a result, portfolio loans often have more flexible terms and lending requirements than traditional loans.

Another beautiful little benefit is that portfolio loans allow you to finance multiple properties under a single loan (hence, “portfolio”). Portfolio loans can also allow for lower down payments than traditional loans, which is helpful when building a successful rental business! 

Again, these loans are not backed by government agencies, so they have fewer restrictions and requirements than FHA or VA loans. I strongly recommend checking out portfolio loans - a big reason I now own and manage 18 luxury short-term rentals.

You can also try blanket mortgage loans, similar to portfolio loans but different in that they use your properties as collateral.

With Proper Financing, Turn 100K a Year Into 100k a Month!

Rental property mortgages have the potential to change your life forever. How do I know? 

Growing up in one of the poorest countries in the world, Haiti, I understand the struggle. I recognize that life can sometimes beat us up and churn us out, and I know as well as anyone what it is like to put exhausting, never-ending hours into clocking in and out. 

As a wife, full-time mom, and current owner of 18 short-term gems, I now have the life I once dreamed of. And to be honest with you? It’s not about working hard. It’s about working smart.

Escape 24/7 hustle culture and choking debt, and discover a new way of living with luxury assets. 

Need money to start your journey? Whether you have zero properties or many, my financing guide has you covered! 

One of my students, Kriss D., put it best: “I’ve been a realtor for years and never heard of some of these products. I wouldn't have closed on our beach home had it not been for the Funding Bundle.”

Learn how my students acquired $7 million in property value in just 6 months!

Check out my Funding Super Pack today.