Purchase or Refinance your Short-term Rental Property

Answer this short pre-qualification form and have a loan officer reach out with a term sheet immediately.

This Pre-qualification also applies to long-term 30-year amortized rental loans, leased or un-leased, 1-4 units residential, condo or townhomes and 5-8 unit multi-family and mixed-use properties. Minimum Fico is 680. Loan amounts from $75k to $1M. Rates in the 4’s for 720+ fico.

7 Things to Know About Vacation Rental Financing

If you have ever considered purchasing a short vacation rental, you’ve likely had these questions. Fix and Flippers explores the nuances of the short-term rental finance industry and breaks down how you can successfully close on your first vacation rental using alternative financing or refinancing your existing portfolio to generate cash for personal or investment purposes.

Post-Covid, many people choose to rent an all-inclusive unit for vacation instead of the community aspect of hotels. 2021 vacation rental statistics report that vacation revenue in the U.S. is expected to show a growth rate of 10.55%

  • Cash-out. Refinance, Purchase
  • They qualify based on the property cash flow, no personal DTI
  • Perfect for underwriting short-term rents
  • Full 30 years with no balloons for peace of mind
  • No tax return requirements
  • Simple, haggle-free pricing

You can protect your identity and other assets by borrowing in a corporate entity.

This loan is meant to be scalable, and there is no limit to how many properties you can finance. Although they provide purchase and refinance financing up to 80% LTV, most customers choose to obtain a cash-out refinance (up to 75%) to purchase or improve another vacation rental property.

The process to get funded:

  • Application Stage – complete an application. Then pay for the appraisal. You can provide access to your credit reports.
  • Processing – Submission of docs
  • Closing – Processes complete loan package and underwrites it. Once approved, closing is scheduled.

There is an appeal to investing in vacation rentals. 

It can provide a fun place to visit for you and your family to vacation, and at the same time, build wealth in an investment portfolio. 

Maybe this is your first purchase, or you’re seasoned and have been investing many years; either way, the industry has its quirks, and we’ll break down the nuances here in this Fix and Flippers article, including:

  • Management of vacation rentals.
  • Choosing a loan and other short-term rental financing. 
  • Finding the perfect vacation rental property
  • Getting yourself prepared to invest.

Perfect time to invest in Vacation Rentals

Short-term rentals or (STRs), including vacation rentals, have been growing in popularity, with Airbnb and HomeAway being major platforms for hosts. 

The projection is for the market to reach over $13M in rental revenue in the U.S. in 2021, with Covid-19 driving the demand.

Vacation rentals are considered a safer travel option, with more people trying them and choosing them over hotels.

Management of your vacation rental

Once you’ve purchased, insured, and stocked your vacation rental, now you need to decide how you plan to manage this investment.

Hiring a Property Manager

Do you want to do it yourself? If so, there are many tools you can use to help you. You’ll need to make time for many tasks. Here are a few: market the property, clean up after the tenants, handle misc maintenance, key distribution, and accounting.

Most professional investors choose to hire a local property manager; when you decide, consider whether you have the time or expertise to screen potential customers? Do you want to interact with them yourself? Is the property close enough for you to quickly access at short notice? Do you have time to manage the websites for booking, then cleaning?

Choosing a Loan and other Short-term Vacation Rental Financing.

The first thing to keep in mind is that you’ll need a larger down-payment for an investment property. With an owner-occupied loan, you can put down as little as 3%, but investment loans are a higher risk category and will require at least 20% of the purchase price. 

You should also have a budget to stock your vacation rental property fully; you’ll need furniture and amenities, in addition to the closing costs, insurance, vacancy expenses, and down-payment. 

Apply for Rental Loan

You can get a term-sheet for your transaction in 24 hrs if you apply with our 5 minute quiz.

What are the Good and Bad Aspects of Vacation Rentals?

The Good

Generate higher returns – you can earn higher returns with vacation rentals than long-term rentals; sometimes, higher revenues that higher operating expenses can offset. 

Lots of vacation rental sites available

It’s easier than ever to market your vacation rentals with growing demand.

Higher Appreciation

Homes that are higher-priced in desirable areas tend to appreciate more than the average long-term rental property. 

Use the property yourself.

As the owner, you can choose when you’d like to stay at the property for a limited amount of days without losing your tax benefits. 

The Bad


You should always check the requirements of each specific area before purchasing a vacation rental. In addition, many cities and homeowners associations have strict regulations and possible bans on short-term rentals; this is why you should work with a qualified expert in short-term vacation rentals.    

The Off-Season

Vacation rentals tend to be seasonal, and winter draws snow-birds. 

Management Pains

You’ll have guests checking in and out every three days or so, and you’ll need cleaning every three days. Also, you need to get your keys back from guests and get the keys to new guests. If you live in another city this can be challenging. This is why a good property management company is essential.

Finding the Perfect Vacation Investment Property 

The location is the most important factor in shopping for the perfect property. You’ll want a realtor that is a specialist in vacation rental homes. Ask your agent to get you a competitive analysis in the area that you want to invest in.

 This due diligence will provide insights on the walking distance to entertainment, food, and freeways, occupancy rates, current supply and demand in the area, and average revenue for rentals in the area, as well as the crime rate. 

Some investors use technology to get general vacation rental data on specific areas.

Different kinds of vacation rental loans

Conventional Mortgages

If this is your first vacation property, you should start your search for financing with a conventional lender like Quicken, Wells Fargo, or Chase. Like the loan on your primary home, you’ll need to put down 10-20% with up to 12 months cash reserves; the amount depends on your credit score and your income. You must meet this requirement without any rental income included. With these loans, they take 2-6 months to close with full docs, tax returns, and income and asset verifications, along with letters of explanations. 

Alternative Solutions

If you are self-employed or own multiple rental homes already, you should try a portfolio or alternative loan. Community banks usually give portfolio loans; these loans are more expensive in terms of fees and rates than the conventional mortgage and amortize over 15 or 20 years instead of 30 years. They also include a balloon payment after 5 or 10 years. 

These loans also require a lot of documentation and verifications and 60-120 days to close. Alternative mortgage lenders will offer a faster, smoother process with more flexibility but at a higher cost. 

Many investors and business owners prefer to use an alternative lender for many reasons, including owning too many properties to qualify for a conventional mortgage or owning their assets in a legal entity for protection and privacy, which is not allowed with traditional loans. 

Fast Facts About Financing Short-term Rental and Vacation Homes

Typically appraisers are hired to complete reports for owner-occupied properties. Appraisers are rarely hired to appraise long-term rental properties, making it difficult to determine the potential gross rents and their actual rent performance. 

Pay attention to the turnover costs; for example, if you generate $3,000 per month on your short-term rental and only $2,000 on a long-term lease for the same property, the short-term property may appear more profitable on the surface. Still, you’ll also have a higher turnover. 

Make sure your Vacation Rental is Adequately Insured. 

If you rent your vacation property most of the year, it’s considered a business; therefore, a standard homeowners policy isn’t enough coverage. When shopping around for insurance rates, you should consider these factors: 

  • Property protection – includes coverage for property and structures like garages, fences, and swimming pools, And could also have a personal property like your furniture. 
  • Liability coverage – Having liability insurance is essential to cover medical bills and legal expenses if a guest gets injured at your vacation rental property.
  • Loss of Rent Coverage – If you can’t rent out your property because of a fire, a flood happened, or if a guest damages the house, Loss of Rent coverage will help with loss of rental income. 
  • You may also want to get supplemental coverage depending on your location; if the vacation rental is in California, you may want to get coverage for earthquakes and fires. If your rental is in Florida, having flood insurance is crucial. 

Suppose you’d like to work with lenders who understand the nuances of underwriting vacation short-term rentals with full 30-year mortgage terms with no balloons and low documents needed to qualify. In that case, you can finance in your name or an entity to protect your identity and assets. 

Evaluating the Revenue Potential of a Vacation home. 

If you use software for sizing up deals, find one with tools that give you insights on the annual revenue, average daily revenue, occupancy rate, cap rate, net operating income, and more. 

Marketing Your Vacation Rental

Since the vacation rental market is so competitive, so you’ll have to work hard to make your property stand out. If you work with a good property management company, they’ll handle all of this, including listing the rental on Airbnb and VRBO. Here are some tips to help you stand out. 

By highlighting the home’s unique features with high-quality professional photos and showcasing the homes’ cleanliness and proximity to local attractions, shopping, dining, and outdoor recreation, you can outdo your competition.

If you have positive reviews, highlight those as well. 

If you’d like to Refinance or purchase a Short-term Vacation rental, apply below.

Apply for Rental Loan

You can get a term-sheet for your transaction in 24 hrs if you apply with our 5 minute quiz.