AirDNA presents the best loans for investment properties, including conventional mortgage loans, DSCR loans, and more. With the ideal loan that matches your goals, you can confidently tackle the complexities of the short-term rental market and optimize your investment prospects.

The Best Loans for STR Investment Properties

Investment property loans can be facilitated through banks, private lenders, or even crowdsourcing platforms.

Unlike standard residential mortgages, some investment property loans consider the property's income-generating potential, giving investors more options.

Investors must consider equity requirements, down payment standards, and interest rates when choosing a loan.

The right financing can unlock real estate investment opportunities for aspiring short-term rental (STR) hosts.

Traditional financing often falls short for those in the STR market. In contrast, investment property loans offer the distinct benefit of considering the property's income-generating potential—a golden ticket for savvy real estate investors.

However, not all investment property loans are created equal. You must carefully choose the right one that aligns with your specific goals and market conditions. We've compiled a list of the best loan types for investment properties, whether you're new to the rental market or looking to expand your portfolio.

AirDNA’s powerful yet easy-to-use tools make hosting and investing a breeze. This means having every insight you need, all in one place, always up-to-date.

An investment property loan is a financing option specifically designed to fund the purchase or improvement of properties intended for investment, including short-term rentals. STR loans specifically might have restrictions around what type of properties are eligible, as well as limits on how often the property can be used as a primary residence.

Standard residential mortgages are primarily based on the borrower's financial situation and creditworthiness. Investment property loans, however, also consider the property's income-generating potential. This allows investors to explore a wider array of property loan options. 

What Makes a Loan Good For Investment Properties?

The right financing option for you depends on your unique situation. Because the relevancy of each investment loan depends on your financial situation and your goals, we’ve avoided a ranked list for loan options.

Instead, we’ve broken out loan options into three loose categories: most common overall, house-hacking loans, and loans for borrowers with existing property.

When determining whether a loan option is “good” for you, consider these questions:

How soon do you want to leverage the property as a short-term rental?

Some loans require the borrower to use the property as a primary residence for at least a year before renting it out. If you’re willing to play the long game with your investment, then this restriction might not be a dealbreaker. 

Investors can also choose to “house hack” with these loans, pursuing multi-family properties where one unit serves as their primary residence while the other units are immediately rented out for income.

If you want an immediate return on your investment AND you already have a primary residence, then house-hacking loans probably aren’t a good fit for you. 

Different loans have different standards for borrower financial standing and savvy. On a basic level, your credit score will impact your eligibility to varying degrees depending on the loan. On a more nuanced level, your history and/or expertise around property management and real estate investment—or lack thereof—can influence your eligibility and the terms of the loan.

The property–how it fits into your investment portfolio, its state of repair, and what market it’s located in–informs your ideal loan and which loan terms make the most sense for you.

Do you have existing property equity? Are you a first-time home buyer or is this your fourth or fifth real estate investment? 

Are you on the hunt for a fixer-upper or are you eyeing property that has a track record as a successful short-term rental? 

Are you looking to buy in a market where the revenue potential can support a short repayment period or high interest rates?

These are just a few of the questions to ask yourself as you consider different loan types. The variety of financing options available to investors, especially in the STR market, is broader than you might even realize. Each loan type caters to distinct financial situations, investment goals, and property potentials. More choices means that investors are empowered to find the loan that best fits their circumstances, maximizing their opportunities in the STR market.

Gain insights into the revenue and occupancy trends in your market.

Conventional mortgage loans emphasize the borrower's financial stability as a key factor. Not all lenders will offer a conventional mortgage for short-term rental properties, so make sure to do your homework.

They typically require a minimum credit score of around 620 for eligibility. Conventional loans also demand a more substantial down payment, usually starting at 15%. A 20% or higher down payment eliminates the need for Private Mortgage Insurance (PMI). PMI is required when down payments are below 20%, serving as a safeguard for lenders in case of default.

Conventional mortgage loan terms are typically 15, 20, or 30 years. While shorter-term loans generally result in higher monthly payments, they also usually benefit from lower interest rates.  

According to AirDNA analysis of Mortgage News Daily data, there has been a 0.8% increase in mortgage rates over the past year alone. In light of this, adopt a well-thought-out financial strategy that considers both the cost of borrowing and market conditions. 

Investors Prioritizing Stability: Conventional loans are ideal for those seeking predictable payment schedules, especially with fixed-rate options.

Long-Term Planning: Investors planning for the long haul might prefer conventional loans for their consistent terms and the potential to build equity over time.

Higher Entry Requirements: The more demanding credit and down payment standards can be a barrier for some investors.

PMI Additional Costs: PMI requirements for lower down payments add an expense until enough equity is built.

Interest Rate Sensitivity: Given the long-term nature of these loans, changes in the mortgage market can influence the cost of borrowing. Mortgage rates are currently at their highest level in over 20 years. This is a crucial deciding factor for investors looking for the best investment property loan.

Investors looking at short-term rentals should weigh these factors against their properties' potential income. Consulting with a mortgage professional with expertise in the STR market can be invaluable in navigating these waters and securing a loan that fits one’s investment strategy.

A Commercial Loan, commonly called a Debt Service Coverage Ratio (DSCR) Loan, supports the acquisition or refinancing of investment properties. The central metric for these loans is the DSCR, which measures a property’s ability to generate sufficient cash flow to exceed its debt obligations.

This ratio is calculated by dividing the property's annual net operating income (NOI) by its annual mortgage debt service, including interest and principal. A DSCR of 1.25 or higher for STR properties signals that the rental income surpasses debt obligations by at least 25%, offering a cushion against potential vacancies or unforeseen expenses. AirDNA’s Rentalizer™ is an Airbnb profit calculator that you can use to evaluate a property’s earning potential. 

Investing in short-term rentals can be lucrative — as long as you're in the right location. Let us help you find the best place to invest in a vacation rental. 

Key factors such as the stability of rental income, property valuation, and the specific terms of the loan (like interest rates and amortization periods) play pivotal roles as they directly affect the DSCR. 

Additionally, lenders may consider the investor’s expertise in property management and the local STR regulatory environment, which can impact the profitability of the investment.

Investors Seeking to Maximize Income: Particularly beneficial for those aiming to capitalize on properties with high rental yield potential and consistent occupancy rates within the STR market.

Experienced STR Investors: Best suited for seasoned investors who have demonstrated success in managing STR properties efficiently and navigating the complexities of the STR market.

Rigorous Financial Assessment: A detailed analysis of rental income and operational expenses is essential to ensure the property meets or exceeds the required DSCR. This analysis can apply to historical data or future projections, which AirDNA can help with.

Regulatory Compliance: Investors must be well-versed in, and compliant with, local STR regulations, which vary widely and can affect whether the vacation rental is legal and profitable.

Property Management Experience: Lenders often favor borrowers with proven property management experience in the STR sector, as this experience greatly reduces the perceived risk and makes successful loan repayment likelier.

Hard money loans offer real estate investors specialized short-term financing by using the property itself to secure the loan. The “hard” in hard money refers to the tangible asset that backs the value of the loan. Also known as bridge loans, they’re often used to help finance one property while preparing to sell another.

Hard money loans are funded by private investors or companies rather than traditional banks. These loans have the advantage of rapid approval and funding processes, which are crucial when quick access to capital is necessary.

STR Investors Facing Tight Deadlines: Ideal for investors who need to complete renovations and start generating rental income quickly, typically in markets where demand spikes seasonally.

Fixer-Upper Properties: Best for acquiring and transforming properties that require extensive updates to meet STR standards, facilitating a rapid turnaround and entry into the rental market.

High Cost of Borrowing: Rental property investors should be aware of the higher interest rates and closing costs, which can impact the overall profitability of their investment projects.

Short Repayment Period: The duration of these loans are typically short, ranging from 6 to 24 months. This requires investors to have a clear and immediate exit strategy to manage the financial risk associated with the principal repayment due typically at the end of the loan term.

Federal Housing Administration (FHA) loans, typically designed for primary residence purchases, also offer substantial opportunities for real estate investors targeting the STR market. 

FHA loans are attractive due to their lower down payment requirements—3.5% for those with minimum credit scores of 580 or higher and 10% for those with scores between 500 and 579. They also feature competitive, potentially adjustable interest rates, although they require both upfront and annual mortgage insurance premiums. 

Investors with Lower Credit Scores: The more accessible minimum credit score requirement opens doors for a broader spectrum of investors.

First-Time Real Estate Investors: The lower down payment and structured guidance on property standards make these loans particularly friendly for newcomers.

Multi-Unit Property Investors: Those interested in "house hacking" by living in one unit and renting out others will find FHA loans ideally structured for such investments. FHA loans allow you to purchase multifamily complexes with up to four units.

Mandatory Residency: Investors must occupy the property within 60 days of closing and live there for at least one year before renting it out. There are exceptions to this if you suddenly need to move or have a new family member, but the penalties are stiff if you fail to follow those requirements without extenuating circumstances.

Additional Costs: The required mortgage insurance premiums can affect the overall cost of the loan, both at closing and over the life of the loan.

Cash Reserves Property Standards: FHA may require investors to hold cash reserves sufficient to cover several months of mortgage payments. The property must also meet stringent safety, security, and soundness standards set by the FHA, which includes a mandatory appraisal.

Property Standards: The property must meet stringent safety, security, and soundness standards set by the FHA, which includes a mandatory appraisal.

Understand the investment potential of any address in the world.

Veterans Affairs (VA) loans offer favorable terms specifically tailored for service members, veterans, and their families who intend to occupy their investment properties. Similarly to FHA loans, investors must live in the property for at least one year before renting. 

VA loans facilitate 100% financing without requiring a down payment for primary residences, benefiting eligible borrowers who aim to minimize upfront costs while generating rental income from STRs.

Eligibility for a VA loan hinges on meeting specific service criteria and certifying that the property will serve as the borrower’s primary residence. Although perfect for financing personal residences, VA loans are not suited for investors that immediately want to generate revenue by using their new property as an STR. 

Veteran House Hackers: Service members must live in part of the multi-unit property they are purchasing, but they can rent out any remaining units immediately upon purchase.

Primary Residence Investors: Veterans planning to occupy the property and wanting to leverage the no-down payment benefit to ease cash flow concerns.

Occupancy Requirements: Borrowers must use the property as their primary residence for at least one year before renting, which restricts its use as solely an investment property.

Navigating Loan Restrictions: Veterans interested in using a VA loan for mixed-use or house-hacking scenarios should consult with a VA-approved lender to ensure they meet all regulatory and occupancy requirements.

A Home Equity Line of Credit (HELOC) is a flexible financial tool that allows real estate investors to tap into the equity of their current property to finance additional investments, such as short-term rental properties. 

Unlike traditional loans, a HELOC provides a line of credit that investors can draw from as needed, up to a predetermined limit. During the draw period, borrowers typically have the option to make interest-only payments, which can help manage cash flow by minimizing initial outlays.

Investors Seeking Flexible Funding: HELOCs are ideal for investors who need access to funds over a period of time rather than a lump sum at once.

Short-Term Rental Owners with Existing Property Equity: Owners who have significant equity in one property and wish to leverage it to invest in additional properties or expand their rental offerings.

Equity Requirements: Investors must have substantial equity in their property to qualify for a HELOC.

Variable Interest Rates: The rates are typically variable and can fluctuate with changes in market rates, which could affect monthly payment amounts and overall financial planning.

Impact on Cash Flow: It's crucial to analyze how the additional debt service will affect the property’s net cash flow, especially since monthly rental income must cover this new expense.

Cash-out refinancing is a strategic financing option that allows real estate investors in the STR market to access the equity built up in their properties. By replacing an existing mortgage with a new, larger loan, the difference is provided in cash. This cash can then be used for property improvements, expanding the number of STR properties, or covering other investment-related expenses. 

The terms of a cash-out refinance typically range from 15 to 30 years, with the maximum loan amount usually capped at 75% of the property’s current appraised value. Lenders generally require that the property has been owned for a specific period before approving a cash-out refinance.

STR Investors Looking to Expand or Upgrade: Ideal for those aiming to reinvest in their current STR properties or expand their portfolio with additional properties.

Investors with Substantial Property Equity: Suitable for STR property owners who have accumulated significant equity and wish to leverage it to finance further STR ventures.

Substantial Equity Requirement: The existing property needs to have appreciated in value or the mortgage has to be substantially paid down.

Potential for Prepayment Penalties: Investors should be cautious of any prepayment penalties that could apply if the loan is paid off early, particularly if the refinancing strategy is intended for short-term financial restructuring.

Cost vs. Benefit Analysis: It is crucial to carefully assess the potential increase in STR value and rental income against the costs associated with higher interest rates and fees from refinancing. This analysis will help ensure that the refinancing leads to a net positive financial outcome.

Plan your STR strategy based on real booking activity and trends—plus, see how things change year over year.

AirDNA can be used by lenders to validate or assess income potential as they underwrite properties. How, exactly? 

The AirDNA Airbnb Calculator allows you to estimate your rental income accurately. By comparing similar rental properties, our calculator makes extremely accurate assumptions on the earning potential for any address, anywhere in the world. 

The loan underwriter, i.e. the financial expert who assesses risk factors and ultimately recommends you for the loan, can use this information to verify whether a property’s revenue potential can support the loan terms. This assessment is particularly relevant to DSCR loans, which take into account the income-earning potential of a property. 

Choosing the Best Loan for Your Investment Property

Choosing the right loan for your rental investment property involves more than just reading the fine print on these loans. 

You must consider your investment strategy and return on investment (ROI). Our guide to short-term rental financing outlines how to assess the current economic climate and develop a financing roadmap. 

You’ll also want to check out this podcast on acquiring your loan when you’re ready to take the leap. Remember, there’s no one best loan for an investment property, just the best for the goals you have in mind.

Choose the best loan for investment properties with AirDNA's guide to common loan types for short-term rentals.

Airbnb Occupancy Rate: Insights and Tips

Key Takeaways
The Airbnb occupancy rate is a vital metric for success and is calculated by dividing the number of booked nights by the available nights. The occupancy rate reflects how often your property is rented out compared to its availability.
Understanding and monitoring your occupancy rate is key to maximizing earnings, as it indicates property performance and influences pricing and marketing strategies.
How you interpret your occupancy rate is essential; high and low occupancy rates don’t always mean what you think.

Successful Airbnb hosts are obsessed with bookings, and for good reason—it’s the name of the vacation rental game.

When hosts talk about Airbnb bookings, they're really talking about occupancy rate: the percentage of available nights that guests book. Monitoring your occupancy rate is important because it shows how well your Airbnb stacks up against the competition. The occupancy rate can also indicate whether you need to switch up your strategy or pricing to boost your rental income.

Whether you’re new to short-term vacation rentals or an industry expert, it’s important to understand the methodology and best practices behind your occupancy rate. 

Learn about short-term rental data

What is Airbnb Occupancy Rate?

In its simplest form, the occupancy rate is the percentage of time a vacation rental property is booked compared to the time it is available for bookings. 

To make understanding occupancy rate easier, let's use a straightforward example.

Imagine you own a cabin that's available for guests all year. That means it could potentially be booked for 365 nights. Throughout the year, guests book your cabin for 90 of those nights. We can use that number to calculate the occupancy rate and see how often your property was rented out compared to its availability. 

By dividing the booked nights (90) by the total available nights (365) and multiplying by 100 to get a percentage, we find an occupancy rate of approximately 25%. This means your cabin was rented out for about a quarter of the year.

Reasons Why Your Occupancy Rate Matters
Maximize Revenue Potential: Physical products can be sold at any time if they’re not immediately purchased. However, a vacant vacation rental represents a unique challenge. If a property goes unbooked for a night, it's impossible to "sell" that night again. Each unbooked night directly translates into a tangible loss of potential income. That’s why the occupancy rate is crucial for owners looking to maximize their earnings. 
Reveal Property Performance Insights: Consider two similar properties in the same location. Property A consistently achieves an 80% occupancy rate, while Property B struggles to reach 50%. This stark difference signals that Property A might be better aligned with guest preferences or have better marketing. Analyzing occupancy rates helps identify performance gaps and areas for improvement, whether that's improving your listing or adjusting pricing strategies to meet market demand.
Determine Market Demand and Inform Pricing Strategies: High Airbnb occupancy rates indicate strong market demand, while low occupancy rates can reflect lower demand. This information informs your pricing strategy. Let’s consider an apartment near a convention center that has high occupancy during events but low occupancy rates otherwise. This trend suggests that you may want to consider adjusting your rates in relation to the convention center’s event calendar. Dynamic pricing takes into consideration trends like this and uses them to optimize revenue during peak and off-peak times.
Guide Investment and Enhancement Decisions: Evaluate occupancy rates before and after making upgrades, like installing high-speed internet or renovating the kitchen, to assess the return on investment (ROI). This analysis is crucial for prioritizing property improvements that make your listing more appealing and, subsequently, improve the occupancy rate.

Learn about Dynamic Pricing

How to Calculate the Airbnb Occupancy Rate

Understanding the occupancy rate of your Airbnb property is pivotal for optimizing your rental strategy. Yet, it all comes down to a single equation.

Airbnb Occupancy Rate Calculation

Reserved Days / Available Days x 100 = Occupancy Rate

With that in mind, here's a simple guide on how to find Airbnb occupancy rates:

Step-by-Step Calculation
Determine the Total Number of Reserved Days: Start by counting how many days guests booked your property over a specific period of time, usually 12 months. 
Identify the Total Number of Available Days: Calculate the total days your property was available for booking over the same time period, excluding any days you blocked off for personal use.
Calculate the Occupancy Rate: Divide the total number of reserved days by the total number of available days, then multiply the result by 100 to convert it into a percentage. These steps represent AirDNA’s version of an Airbnb occupancy rate calculator.

Example Calculation:

Imagine you own a house on the water in North Carolina and you're evaluating its performance on Airbnb over the last 12 months. The property was available for 340 days and booked for 240 days within this timeframe.

Reserved Days: 240

Available Days: 340

Occupancy Rate Calculation: 240/340 x 100 = 70.58%

Calculate potential earnings

Understand the investment potential of any address in the world. 

See your STR revenue potential
Interpreting Your Occupancy Rate

While a 70% occupancy rate may seem ideal, signaling guest satisfaction and consistent revenue, it's essential to delve deeper. High occupancy could indicate underpricing, meaning you might be missing out on potential income. It's crucial to balance occupancy with your average daily rates (ADRs) to maximize revenue. 

Think about it: A property with a 50% or 60% occupancy rate could earn more revenue than one that’s booked 70% of the time. It’s all relative to pricing. A property booked more often at $100 per night may not outearn a property that’s booked less often at $300 per night.

It’s important to ask yourself: Do I want higher occupancy or higher average daily rates (ADRs)? An accurate data tool can help you sort out which strategy is best for your bottom line. (Why guess when you can know exactly what you should be charging guests?)

What is a Good Airbnb Occupancy Rate?

Average Airbnb occupancy rates vary from market to market and year to year. You can see how the national average occupancy rate has fluctuated:

Trailing twelve months (TTM), March 2023 to February 2024: 55.1%
2023: 55.4%
2022: 58.6%
2021: 60.3%

The occupancy rate in 2022 reflects a recovery trend in the industry after the pandemic brought the average occupancy rate into the low fifties in 2020.

Determining a "good" rate is less about finding a universal number and more about understanding local market conditions, historical performance, and your personal goals for the property. Knowing your market's average helps inform decisions on pricing, marketing, and operations.

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Average Airbnb Occupancy Rates by City: Top 10 Highest Occupancy Rates

If you’re new to the short-term rental market, understanding the average airbnb occupancy rates by city can help you choose a location that’s likely to generate a healthy revenue.

These markets had the highest trailing twelve-month short-term occupancy rates (March 2023 to February 2024):

Kauai, Hawaii: 74.4%
Oahu, Hawaii: 73.4%
Maui, Hawaii: 72.4%
Maine DownEast/Acadia Coastal: 67.7%
Big Island, Hawaii: 67.1%
New York City: 65.5%
Denver: 65.3%
Anaheim, California: 65.2%
Boulder, Colorado: 64.3%
 Outer Banks, North Carolina: 64.3%

Many of the markets with the highest occupancy rates are located in Hawaii. However, seeing as the vacation rental market in Hawaii is subject to fairly heavy restrictions, let’s consider the markets with the highest occupancy rates in the contiguous U.S.

Maine DownEast/Acadia Coastal: 67.7%
New York City: 65.5%
Denver: 65.3%
Anaheim, California: 65.2%
Boulder, Colorado: 64.3%
Outer Banks, North Carolina: 64.3%
San Diego: 64.2%
Sarasota, Florida: 64.1%
Lincoln City/Newport, Oregon: 64%
Gatlinburg/Pigeon Forge, Tennessee: 63.9%

Average Occupancy Rates by City: Top 10 Lowest Occupancy Rates

The average Airbnb occupancy rates by city in the following areas leave hosts wanting more. These markets currently have the lowest trailing twelve-month occupancy rates:

Oxford, MS: 34.9%
Big Bear, CA: 39.6%
Southbend, Indiana: 40.4%
Texas East Area: 41.4%
College Station, Texas: 41.8%
Mississippi area: 42.1%
Augusta, Georgia/South Carolina: 42.8%
Pocono Mountains, Pennsylvania: 43.2%
California South area: 43.7%
 Louisiana area: 43.9%

If you’re looking to invest in vacation properties, avoid these markets because you likely won't get a good ROI. Property managers and hosts in these markets may need to lower their rates to encourage guests to book with them rather than other Airbnbs.

Hottest Airbnb Markets
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Why Airbnb Occupancy Rates Differ from Hotels 

Hotels offer a consistent product and pricing strategy, but STRs vary widely in terms of property type, location, amenities, and host engagement. It’s crucial to assess STR occupancy differently than traditional hotel occupancy in order to accurately reflect performance in the vacation rental market.

AirDNA only considers active listings in its occupancy rate calculations, whether it’s for a specific market or when someone uses our Airbnb calculator. We define active as having at least one calendar day classified as reserved or available during the reporting period. If we included every available night from every available listing in our occupancy calculation, it would return a falsely low occupancy rate. This is due to variations in vacation rental host behaviors and motivations. We’re talking about host attentiveness in managing listing calendars and their responsiveness to reservation requests.

Here are three host cases that would falsely skew occupancy downward if we included them in the occupancy rate calculation: 

Event-Based Hosts: Hosts who list properties temporarily to take advantage of specific events, causing temporary market fluctuations that don’t reflect regular hosting activity.

"Make Me Move" Hosts: Hosts who set their prices significantly above the market rate, using Airbnb as an opportunistic platform rather than a committed hosting venue.

Dormant Listings: Properties that appear available but haven't seen a booking for months, often due to a shift in host priorities or property usage.

AirDNA ensures that its occupancy rate calculations reflect genuine market activity and trends by focusing on active listings. We stand by the accuracy of our data and use this methodology to help stakeholders understand the true dynamics of the STR market. Our insights are distinct from those that can be gleaned from hotel occupancy data.

How to Get High Occupancy on Airbnb

Occupancy rate may not be a complete picture of your property’s performance, but it’s still important. After all, you’re only making money if guests are staying at your property. If your occupancy rate is falling short of expectations, take these data-driven steps to learn how to increase occupancy rate on Airbnb. 

Increase Your Airbnb Occupancy Rate

Occupancy Rate is Just the Beginning  

According to ou annual best places to invest report, most of the destinations at the top of the list have occupancy rates of 60-70%. If you're interested to learn more about a market's occupancy rate, visit the AirDNA app.

While Airbnb occupancy rates are important, you need to track a range of metrics to assess how your Airbnb is performing overall. Our insights can help you optimize your properties for the best possible occupancy rate, average daily rate (ADR), revenue per available rental (RevPAR), and overall profitability.

Frequently Asked Questions:
What is a good occupancy rate for an Airbnb?

There is no universal “good" occupancy rate. Determining whether your occupancy rate is optimized requires understanding local market conditions, historical performance, and your personal goals for the property. Keep in mind that lower occupancy rates don’t necessarily indicate lost revenue. If you are charging a higher average daily rate, you might not need as many bookings to make as much money as a competitor with higher occupancy but a lower nightly rate.

Where can you see Airbnb occupancy rates?

You can see the occupancy rate for your listing as well as that of competitors in the area on your AirDNA dashboard. 

Find out what “Airbnb occupancy rate” refers to, how to calculate it, and tips for improving your occupancy rate and increasing your STR income.

The Best Loans for STR Investment Properties

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