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    Try “cap rate”, “seasoning”, “LTV” or “Airbnb income”.

    Short-term rentals

    Buying and running a vacation rental: picking the market, estimating the income, the rules and the insurance.

    A short-term rental can out-earn a long-term lease on the same house, and it can also be shut down by a city ordinance or flattened by a slow season. The difference is almost always made before the purchase.

    These guides walk through buying a short-term rental, how to estimate what it will really earn, how it compares with a long-term tenant, and the regulation and insurance checks that keep a good deal from going wrong.

    Getting started

    1. How to buy an Airbnb property

      A short-term rental is a small hospitality business that happens to be a house. Here is the order to buy one in, and what to check at each step before money changes hands.

      Beginner12 min read
    2. Airbnb vs long-term rental

      A short-term rental usually grosses more. Whether it nets more depends on the costs, the management, the rules and your time. Here is how the two compare, line by line.

      Beginner9 min read

    Income

    1. How much can I make on Airbnb?

      There is no national average worth using. There is a method: price the nights from real comparable listings, build the year season by season, subtract every cost, then test it.

      Intermediate12 min read

    Rules and risk

    1. Short-term rental regulations

      Whether you may host guests at an address is decided by the strictest rule that applies to it. Here is how to find every layer, read it, and get the answer in writing.

      Beginner10 min read
    2. Short-term rental insurance

      A policy written for a home you live in, or for a tenant on a lease, may not cover paying guests. Here is what to buy instead, and what to ask before you sign.

      Beginner10 min read

    Key terms

    DSCR
    Debt service coverage ratio. The property's monthly rent divided by its full payment (PITIA). Investor lenders use it instead of the borrower's income: 1.00 means the rent exactly covers the payment, 1.25 means a quarter to spare.
    DSCR vs DTI
    DTI asks whether the borrower can afford the debt: monthly debts divided by gross income. DSCR asks whether the property can: rent divided by PITIA. Home loans live on DTI; a DSCR loan needs no pay stubs or tax returns.
    Business-purpose loan
    Credit for a business or investment, such as a rental the owner will not live in. It falls outside most consumer mortgage rules (TRID, rescission, ability-to-repay), which is why DSCR and bridge lenders send a term sheet instead of a Loan Estimate.
    Vesting: personally or in an entity
    Whose name goes on the title and the loan. DSCR loans close in a person's name or in an LLC or corporation; an entity brings its articles, operating agreement, EIN letter and a certificate of good standing, and its owners sign a personal guarantee. An LLC adds liability separation, not a better rate.
    Prepayment penalty (PPP)
    A fee for paying the loan off early, by sale or refinance, usually within the first 1 to 5 years. It protects whoever bought the loan, and the borrower gets a lower rate for accepting it. Standard on DSCR loans; home loans on a primary residence mostly cannot have one.
    Prepayment penalty structures
    Step-down: the fee falls each year, written as the percent per year (5-4-3-2-1, 3-2-1). Flat: the same percent throughout (3% or 5%). Months of interest: for example six months' interest on whatever is prepaid above 20% of the balance. Yield maintenance: the lender's lost interest, mostly on portfolio loans.
    DSCR refinance: rate-term vs cash-out
    A rate-term refinance pays off the old loan and costs to change the rate or term; little or no cash comes out, and higher LTVs are allowed. A cash-out refinance takes equity out as cash: a lower maximum LTV (usually 70 to 75%), a higher price and seasoning rules. Both are sized on the property's DSCR.
    Seasoning
    How long something has existed before the lender will rely on it. Title seasoning: time owned before a cash-out refinance can use the new appraised value (6 months is common on DSCR; before that, value is capped at cost plus documented work). Also funds seasoning, and time since a credit event.
    What unlocks a higher LTV
    DSCR leverage comes in tiers on the lender's matrix: credit score (often 700 or 740 for the top tier), DSCR (1.00 vs 1.25), experience, loan size, property type and purpose. Moving up one box is how 75% becomes 80%. Big reserves or documented income can help a file on the edge.
    Cap rate
    NOI divided by price: the return if the property were bought with all cash. A higher cap rate means more income per dollar, and usually more risk. Used to compare deals and to value income property.

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