Funding Options

A conventional mortgage for a second home you'll use personally AND rent out. Lower rates than investment property loans because it's classified as a second home.

Debt Service Coverage Ratio loans qualify based on the property's rental income, not your personal income. The property must generate enough rent to cover the mortgage payment (typically 1.0-1.25x).

Traditional mortgage for investment properties through Fannie Mae/Freddie Mac. Best rates available but requires full income documentation.

Loans held by local banks or credit unions (not sold to Fannie/Freddie). More flexible underwriting for unique situations.

Short-term loans from private lenders, secured by the property. Used for quick purchases or renovations, then refinanced into permanent financing.

Refinance an existing property to pull out equity as cash. Use that cash as down payment for your STR.

A revolving line of credit secured by your home equity. Draw funds as needed, pay interest only on what you use.

Companies like Point or Hometap give you cash for a share of your home's future appreciation. No monthly payments.

Borrow from your own 401(k) - typically up to 50% or $50,000, whichever is less. You pay interest back to yourself.

Move retirement funds to a self-directed IRA that can invest in real estate. The IRA owns the property, not you personally.

Roll 401(k) funds into a new C-Corp that buys your STR business. Complex but allows penalty-free access to retirement funds.

Borrow against the cash value of a whole life or universal life insurance policy. The policy remains in force while you use the funds.

The seller acts as the bank - you make payments directly to them instead of a traditional lender. Great for properties that don't qualify for traditional financing.

Take over the seller's existing mortgage payments without formally assuming the loan. The loan stays in seller's name while you own the property.

Lease the property with an option to purchase at a predetermined price. Part of rent may credit toward purchase.

Seller creates a new mortgage that "wraps around" their existing mortgage. You pay seller, seller pays their lender. Seller profits on rate spread.

Seller spreads capital gains tax over multiple years by receiving payments over time. Win-win: seller saves taxes, buyer gets financing.

Partner with someone who provides capital while you provide expertise, management, or sweat equity. Split ownership and profits.

A partner or private lender who provides the gap between your down payment and what you have. Often used with hard money loans.

Borrow from individuals (not institutions) who want better returns than banks offer. Often friends, family, or professional private lenders.

Borrow from people who know and trust you. Can be more flexible than any other source.

Partner with someone who owns land to build an STR. They contribute land, you contribute capital/expertise.

Invest passively in a fund or syndication that buys STR properties. Professional management, diversification, but less control.

Stack multiple 0% APR business credit cards for down payment or renovation funds. Requires excellent credit and disciplined payoff plan.

Use balance transfer checks from credit cards to access cash at 0% APR. Similar to business credit cards but for personal use.

Revolving credit line for your STR business. Draw as needed, pay interest only on what you use.

Fixed-term loan for your STR business without collateral. Higher rates but no assets at risk.

Government-backed small business loan with favorable terms. Can be used for STR business acquisition or expansion.

Borrow from individual investors through platforms like Prosper or LendingClub. Unsecured personal loans.

Raise capital from many small investors through platforms. Can be debt or equity. Requires compelling deal.

Use cryptocurrency holdings as collateral for a loan. Keep your crypto exposure while accessing cash.

Borrow against your stock portfolio. Quick access to capital without selling investments.

Zero-down mortgage for veterans and active military. Can be used for primary residence that you later convert to STR.

Zero-down mortgage for rural properties. Perfect for rural STR markets. Must be primary residence initially.

FHA loan that includes renovation costs. Buy a fixer-upper and finance repairs in one loan. Must be primary residence.

Free money from government programs for small businesses, tourism development, or rural economic development.

Tax abatements, TIF districts, facade grants, and other local programs to encourage development.

Buy, Rehab, Rent, Refinance, Repeat - but with STR instead of long-term rental. Force appreciation through renovation, then refinance to pull out capital.

Buy undervalued property, renovate for STR use, then keep as rental instead of selling. Capture both appreciation and cash flow.

Start with mid-term rentals (30+ days) to build track record and cash flow, then convert to STR once established.

Finance new construction or major renovation. Converts to permanent mortgage after completion.

Convert inherited property to STR. Often has no mortgage, providing instant equity and cash flow.

Buy For Sale By Owner property with multiple promissory notes - one to seller, one to private lender, etc. Creative structure for motivated sellers.

Finance STR furnishings and equipment separately from the property. Preserve cash for down payment.

Negotiate payment terms with furniture suppliers, contractors, etc. Net-30, Net-60, or payment plans.

Short-term loan specifically for STR setup costs - furnishing, photography, initial marketing. Paid back from first months' revenue.

Negotiate with service providers to defer fees until property generates income. Property managers, designers, etc. may accept.

Trade your skills or services for what you need. Contractors, designers, marketers often open to trades.