A short term rental is a different asset from a long term one. The revenue is higher and less predictable, the operating costs are larger, the regulation is local and changeable, and the lender’s questions are correspondingly different. Here is how these properties actually get financed and what to sort out before you write an offer.
Why the financing is different
A conventional rental loan looks at a lease. A short term rental has no lease. Its income is a revenue stream produced by a business operating inside a house, with seasonality, occupancy risk and a cost base that includes cleaning, supplies, platform fees, higher utilities and management.
Some lenders will not underwrite that income at all. The ones that do treat it as a documented revenue stream rather than a projection, and they price for the volatility. Our rental DSCR program permits short term rental income, alongside published 5, 7, 30 and 40 year fixed terms, LTV up to 80%, rates from 6.50% on the Non-QM tier, a 620 minimum credit score and first time investors allowed.
What the lender needs to see
A documented revenue history. Platform statements or property management reports covering a meaningful period. Twelve months is the common ask, because it captures a full season. Screenshots of a projection are not documentation.
A market opinion. An appraisal that addresses the rental picture, sometimes alongside a market rent opinion. On a property with no operating history this becomes the main evidence.
An honest expense picture. Short term rentals carry costs that long term rentals do not: turnover cleaning, consumables, higher utilities, platform commission, furnishing replacement and often a management fee in the region of a meaningful share of revenue. A file that presents gross nightly revenue with no costs against it does not read as credible.
The regulatory position. Whether the property is permitted for short term use in that jurisdiction, whether any registration or licence is current, and what the homeowners association permits. This is property level risk and it belongs at the front of the conversation.
How the coverage test works here
The arithmetic is the same as any DSCR file: income over debt service, with the loan sized by whichever binds first, the published leverage cap or the coverage requirement. What differs is the income input.
On a long term rental, the input is a lease. On a short term rental, it is documented revenue, and lenders generally apply a more conservative treatment because that revenue is not contracted. The result is that the same gross number supports a smaller loan than a lease at the same level would.
Run the test yourself before you buy. Take the documented or supportable revenue, subtract the real operating costs, compare the result against the payment on the loan you want, and check it against the published LTV cap as well. Our post on how DSCR is calculated walks the arithmetic line by line.
The property level questions to answer first
Local rules. Set by city or county and subject to change. Confirm with the jurisdiction, in writing where you can, and understand whether permits are transferable on sale, capped in number or tied to primary residency.
The association. A homeowners association can prohibit short term letting even where the city permits it, and association rules can change by vote. On a condo this question is unavoidable, and it interacts with whether the building is warrantable at all. See non-warrantable condo financing for how that affects the loan.
Insurance. Standard landlord policies often exclude short term letting. You will need coverage written for the actual use, and the lender will want to be named on it.
The furnishing budget. A short term rental is delivered furnished and equipped. That is real capital that does not come out of a standard purchase loan, so it belongs in your cash plan alongside reserves.
Buying and stabilizing with a short term loan
A property that needs work, or one with no revenue history, is often better acquired with short-term money and refinanced later.
Our bridge program publishes rates from 9.00% to 13.00%, LTV up to 75%, terms of one or two years and no prepayment penalties, for SFR, condo and townhome and two to four unit properties with no borrower experience required. Our fix and flip program publishes up to 85% of the purchase and 100% of the rehab on terms of 6 to 18 months where renovation is part of the plan.
The sequence that works: acquire and improve with the short-term loan, furnish and launch, operate long enough to document the revenue, then refinance into the long-term DSCR loan on the strength of real numbers rather than projections. Plan the refinance before you buy, because a bridge loan with no tested takeout is a deadline. Our post on exit strategy covers how to test one.
Scaling past one property
Investors who build a portfolio of short term rentals usually hit the same wall: financing each property individually becomes slow and the entity structure gets complicated.
Two routes open up. Our rental portfolio product publishes LTV up to 80% on 5, 7, 30 and 40 year fixed terms, with landlord experience required and a 620 minimum credit score. And a blanket loan can place one facility across several properties, which is covered in blanket loans explained.
Get the ownership structure right early either way, because retitling properties later creates title and seasoning complications. Our post on vesting an investment loan in an LLC covers the mechanics.
Where to start
The vacation rental scenario page sets out how we handle these files, and the rental property program page carries the published terms. If you have a specific property and a revenue history, bring both to (619) 617-2797 or the borrow page and we will run the coverage test with you.
