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The Investor’s Guide to Financing an Airbnb Property

Most of us have stayed in vacation rentals at some point. The concept is simple enough; private property owners, often referred to as hosts, rent out living spaces to travelers looking for somewhere to stay. When online marketplaces for vacation rentals began popping up in the mid-to-late 2000s, something of a renaissance was sparked for travelers and landlords alike. Due largely to these websites, revenue from vacation rentals is expected to hit nearly $19.5 billion in 2023 alone, with Airbnb accounting for nearly half that figure. With the market for vacation rentals projected to grow at a steady 1.49% annually, now is a great time to consider becoming an Airbnb host.Citation But, if you’re like most and don’t have the necessary capital to spend on a new short-term rental property, there’s a simple solution — get a loan.

This blog will discuss the ins and outs of Airbnb loans, potential challenges you might face securing one and some of the ways to overcome obstacles as they arise.

What is an Airbnb Loan?

An Airbnb loan is any loan for the purchase of real property with the express purpose of owning and operating a vacation rental. This is a great solution for those looking to break into hosting who might not be able to fund the entire expense otherwise. While there is no type of loan specifically designed for this class of purchase, a variety of loan types can be applied to financing Airbnbs.

What Options Are Available for Airbnb Financing?

Since an Airbnb loan is really just a loan for real property, almost any type of real property loan can be used for the purchase of a vacation rental. However, almost all fall into the broad categories of personal or commercial loans, with a few usable for both purposes. Most of these loans can feature fixed or variable interest rates with the interest rates themselves negotiated at inception — and often tied to one of various indices — regardless of the specific loan type. Here are some examples of Airbnb loans you might want to consider when getting your vacation rental up and running:

Airbnb Business Loan

Some people wonder if you can get a business loan for an Airbnb. And the fact of the matter is that vacation rentals are businesses, plain and simple. Both common sense and banks will tell you the same thing. As such, business loans are available for the expenses associated with acquiring or renovating a vacation rental.

Pros: If you have a good head for business and know how to put together a business plan, this might be for you.

Cons: The increased reporting requirements and business savvy necessary to secure and maintain compliance with your loan may be too much for some to handle. Many business loans also require a certain amount of years in business before approval.

Terms: Generally, a 10%-30% down payment coupled with a minimum interest rate of around 10%, ranging significantly higher depending on the financial institution and soft factors. Repayment periods can last up to 30 years, making this a good long-term option.Citation

Eligibility: Personal credit score, business credit score, number of years in business and viability of business plan are all considered when lenders make a determination.

Owner-Occupied Airbnb Loan

If you’re looking to start hosting and don’t currently own a primary residence, an owner-occupied Airbnb loan might be right for you. In this scenario, the host uses the loan to purchase a multifamily property, then utilizes one unit as their primary residence while renting out the others.

Pros: Allows the borrower a path to homeownership and an investment property at the same time, along with lower attendant costs and fewer barriers to eligibility.

Cons: If you already own a primary home or don’t want to live on your investment property, you won’t qualify.

Terms: Government first-time homeowner incentives, like FHA and VA loans, can bring payments down to 3% or lower for qualified applicants. Interest rates are also typically lower than those seen in most home and business loans. Repayment periods can last up to 30 years, although many end up selling the property when they’re ready to move into a single-family unit. While this may seem like all good news, prospective buyers should know that in the event of a low down payment, private mortgage insurance is required.

Eligibility: You must plan to live on the property you are purchasing a minimum of 70% of the time for at least a year and work no farther than 50 miles away during that same time. There is also additional paperwork attesting to all of this and you must move in within 30 days of closing.

Airbnb Mortgage Loan

Essentially a traditional home loan with stricter requirements, an Airbnb mortgage is a long-term loan, typically from a bank and not part of a government-backed program. While in many respects the same, there are stricter requirements associated with a loan for an investment property as compared to a primary residence.

Pros: Borrowers have far more freedom to negotiate the best possible terms when compared to other types of loans and, for that extra piece of mind, most mortgages are backed up by Freddie Mac or Fannie Mae.

Cons: Good credit and a large down payment are required for these types of loans. Those looking to repay over a shorter loan lifetime might also want to avoid mortgages.

Terms: Down payments should be at least 20%, although putting down more money can help during negotiations. Payments will typically be at a relatively standard mortgage rate, which can fluctuate over time but has the option of being locked in when the loan is taken out. Repayment periods typically range from 10 to 30 years.

Eligibility: Your credit score should be 620 or higher and cash reserves must also be on hand to cover at least six months of operating expenses if you want to qualify.

Home Equity Line of Credit Airbnb Loan

A home equity line of credit is a loan type where you borrow against the equity you’ve accrued in an existing property. There is a draw period during which you can borrow money, followed by a repayment period where you have to pay the money back along with interest.

Pros: Leveraging your equity in a property you already own eliminates some of the worries associated with relying on rental income to cover loan payments. The draw period allows you to put off paying back the loan until your business is more established.

Cons: Adjustable interest rates associated with these types of loans can lead to ballooning interest payments over the loan’s lifetime. If something happens and you can’t begin repaying the loan on time, you could lose your home or other leveraged property.

Terms: Draw periods are typically around 10 to 15 years, with repayment lasting 15-20 years. Adjustable interest rates are mandatory for this type of loan.

Eligibility: A credit score of 620 or higher and at least 15% equity in the existing property are required to be eligible for this type of loan. A solid, and provable, debt-to-income ratio can also be a requirement.

Hard Money Airbnb Loan

Hard money Airbnb loans make up a small percentage of the loans taken out to open or update a vacation rental property. They have shorter repayment periods, require more money down and come with higher interest rates. The size of the loan is typically determined by the value of the collateral it’s tied to, in this case, your investment property.Citation

Pros: These are great if you’re having a hard time getting another type of loan or need the money quickly.

Cons: Larger down payments and higher interest rates make this unattractive to most investors. The lack of recourse, if you can’t make payments, could easily lead to losing your house.

Terms: Down payments of 30% or more are typically required. With interest rates at 8% or higher, these loans are pricey compared to the others on this list.

Eligibility: Typical factors like income and credit don’t apply here. If the value of your new property can cover the loan, there’s a good chance you’ll qualify.


If you’re thinking of using part of your primary residence as vacation lodgings or building an ADU for the same purpose, refinancing is one of your available options. Essentially an extension of your existing home loan, these operate in this case as they would for any other purpose.

Pros: By allowing you to build off of the existing equity in your house, these loans are a great option for those who have repaid a substantial amount of their home loan already and are looking to utilize their primary residence, or the property it sits on, for their Airbnb.

Cons: These loans are only available for those who plan on using their home or its attendant property for their vacation rental. You still lose the closing costs.

Terms: These can vary greatly depending on the home and lender, but are often similar to current mortgage rates and terms.

Eligibility: You must have an existing mortgage to refinance and the money you take out needs to be used for improvements on or to your existing property.

Private Money Airbnb Loans

Private money Aribnb loans are very different from other types of loans in that they operate completely outside the commercial lending system. These loans come from a private source of funding, such as a friend, family member or old business partner, not a bank or other regular lender.

Pros: Because these loans come from someone you know, there’s a good chance they’ll offer you favorable terms and may not care about qualifications like credit or income.

Cons: Unfortunately for many, these types of loans are only available for those with suitable connections and even if you do receive such a loan, there is no recourse should things go awry.

Terms: There are no accepted guidelines for these types of loans and terms are entirely negotiated between lender and borrower.

Eligibility: Having the proper connections is the only real prequalification.

Potential Challenges You Might Face Obtaining an Airbnb Loan

While the requirements above may seem challenging enough, there are other potential pitfalls along the path to obtaining an Airbnb loan. Here are some examples of situations and factors to consider when estimating future profits as part of your loan planning process:

Unexpected Expenses: Like any property, repairs become necessary over time through either simple wear and tear or acts of god. Increases in taxes and inflation can also cause unexpected financial burdens.

Low Occupancy Rates: Due to issues associated with seasonality, it’s important to budget for lower occupancy during off-peak months. Unpredictable developments in the travel industry and the world at large can negatively impact occupancy rates as well.

Damages Caused by Renters: This is a big one. Many prospective hosts think they know how much this will cost, but people on vacation are often careless, or worse. It’s a mistake not to build this into your budget.

Tips for Airbnb Investors

If you’re worried you might not qualify for your desired loan or don’t know where to begin, you’re not alone. In addition to the information already provided, here are some tips to help you get off on the right foot:

Improve Your Financial Standing: This is the most important step you can take to improve the breadth and quality of your Airbnb loan options. Better credit, higher income and more money to put down all make you a more favorable prospect for potential lenders, leading to more qualifications and better terms.

Budget Tips: Creating an accurate and comprehensive budget ahead of time and tracking against it are crucial to the success of your Airbnb. Separate accounts for your new business should also be set up. The types of unexpected expenses discussed above, along with more typical expenses such as property management costs, legal fees and taxes on rental income, all add up more than many initially imagine.

Legal Considerations: Like any business, you’ll need attorneys to advise you on issues like limiting liability and helping form necessary contracts. These can include property management agreements and corporate formation documents should you desire to own your new property through a legal entity.

Insurance Considerations: While Aircover provides a good amount of coverage for landlords on the Airbnb platform, it’s important for everyone providing short-term rental services to make sure their property is properly insured as a vacation rental. At present, many home insurance policies exclude this type of coverage, so it’s important to read your existing policy carefully and see if supplemental insurance is required.


Buying a new property or renovating an existing one is a great way to enter the ever-growing vacation rental market. If you can’t pay for the expenses associated with such an endeavor out of pocket, then getting one of the types of loans listed above could be the right choice for you.

As much as the loan type, choosing the right lending institution can be a key determinant of success. Blue Water Mortgage is an independent mortgage broker authorized to do business in Massachusetts, New Hampshire, Maine, Connecticut, Vermont, Rhode Island, Florida, North Carolina, Colorado, Texas, Georgia, & South Carolina. Its collective 150+ years of mortgage experience and customizable approach create a nimble, client-centric organization that’s ready to meet your financial needs while exceeding your overall expectations.

If you still have questions about financing an Airbnb property, please send us a message here or check out our Mortgage FAQs ebook.

Article Sources

Blue Water Mortgage requires writers to use reliable primary sources, such as white papers, government data, and expert interviews, to produce accurate and unbiased content. We follow strict editorial policies and refer to original research from reputable publishers when necessary.

  1. Statista. “Vacation Rentals – United States,”
  2. NerdWallet. “What Are Typical Small-Business Loan Terms?,”
  3. Investopedia. Hard Money Loan: Definition, Uses, and Pros & Cons,
Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.