Investment

Airbnb/VRBO

Short-term rentals, like those offered through platforms such as Airbnb and VRBO, can be attractive investment opportunities for several reasons. Firstly, they often generate higher rental income compared to long-term rentals, as nightly rates are typically higher. This can lead to increased cash flow and potentially quicker returns on investment. 

Secondly, short-term rentals offer flexibility for property owners, allowing them to use the property themselves when desired. Additionally, the potential for property appreciation can be significant in tourist destinations and growing urban areas, further enhancing the investment’s long-term value. However, success in this market often requires effective property management, marketing, and a thorough understanding of local regulations, making it crucial for investors to do their due diligence before entering the short-term rental market.

You can qualify for a STR investment loan with the following income calculations

  • 1. The potential income shown on AirDNA for new purchases
  • 2. A 12-month history on existing STRs.
  • 3. A rent appraisal requesting STR rent in place of long-term rents.

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F. A. Q's

Frequently Asked Questions

Airbnb or VRBO short-term rental properties can be a great investment opportunity. Short-term rental properties usually offer higher rental income than long-term rental properties due to their higher daily rate. However, finding the right financing for an Airbnb or VRBO can be key to turning your dream into reality. Here are the top 5 questions our clients ask about Airbnb or VRBO loans.

No loan is officially classified as an Airbnb/VRBO loan, but several existing investment loan types suit short-term rental properties. These loans typically have higher down payments and interest rates than traditional mortgages, such as DSCR loans, as they factor in the unique risks of short-term rentals.

Expect higher down payments for Airbnb or VRBO loans compared to traditional mortgages. Typically, you’ll be required to have a 25% down payment for short-term investment properties, but there may be options for lower down payments depending on your financial status, credit score, and potential income projections for the property.

Loan amounts vary based on your income, credit score, property value, location, and projected rental income. You can expect to borrow up to 75-80% of the property value.

The minimum credit score required is 620, but a higher credit score can lower your interest rate. Stable income and experience in rental property management can add an additional advantage. Moreover, having a well-developed business plan for your Airbnb/VRBO venture can strengthen your application. Lenders may consider projected rental income and market demand for short-term rentals in your chosen location.

Not all lenders offer Airbnb/VRBO loans due to the associated risks. However, at Sparrow Capital, we specialize in dealing with short-term rental property financing. We can guide you through the process and find the best fit for your situation.