Hard money for a short-term rental: buying, furnishing and refinancing an STR
A short-term rental is two businesses wearing one roof: a piece of real estate, and a hospitality operation with furniture, cleaners, software and a seasonal revenue curve. Hard money can buy and renovate the first one quickly. Whether you keep it depends entirely on whether a permanent lender will refinance the second one — and on whether the local ordinance still allows it when you finish.
Why an STR underwrites differently
A long-term rental has a lease, and a lease is a document an underwriter can read. A short-term rental has a revenue history, an occupancy rate, a seasonal pattern and an expense load — cleaning, supplies, platform fees, utilities, management — that a lease-based rental does not carry. Lenders respond to that in three ways: they discount the income, they want reserves, and they care about local regulation far more than they would on a duplex.
The bridge lender at the front of the deal is usually simpler than that. Hard money is priced on the property and the exit, not on projected nightly rates, so an STR purchase is underwritten much like any other investment purchase: value, rehab budget, borrower liquidity, experience, and a plausible way out within the term. The complexity lands at the refinance, which is why it is worth solving the exit before signing the term sheet.
What the bridge loan typically looks like
- Leverage: commonly 80% to 90% of purchase price, or roughly 65% to 75% of after-repair value, in recent markets — see the full ranges in our guide to rates, points and LTV.
- Rate and points: illustrative ranges of about 9% to 14% interest with 1 to 4 origination points, interest-only, with a balloon at maturity.
- Term: 6 to 24 months, with extension options that cost additional points.
- Rehab funds: advanced in draws against completed work, inspected before release.
- Furnishings: usually excluded. Lenders finance real property, not sofas.
- Borrower: an entity, with a personal guarantee — see borrowing in an LLC.
Check the ordinance before the offer, not after the rehab
Regulation is the risk that kills STR deals, and it is entirely knowable in advance. Cities and counties have adopted permit caps, primary-residence requirements, minimum-stay rules, zoning restrictions by district, occupancy limits, licensing with annual renewal, and outright prohibitions — and rules have tightened in a number of tourist markets over the past several years. Several specific traps recur:
- Permits that do not transfer. The seller’s license may die at closing; you may be applying fresh, into a queue or a cap.
- Primary-residence rules, which allow short-term rental only if the owner lives on site — fatal for a pure investment.
- HOA and condo bylaws, which can ban rentals under 30 days regardless of what the city allows, and can be amended by a vote after you buy.
- Grandfathering with conditions, where an existing use survives only until it lapses, changes hands or goes a season unrented.
- Lodging and occupancy taxes, collected by the platform in some jurisdictions and owed directly by you in others.
Get the answer from the municipality in writing before your due-diligence period ends, and price the deal so that it still works as a long-term rental if the rules change. That fallback is the single most useful protection an STR buyer has. State-level financing and foreclosure context is summarized on our state hard money pages.
The costs that are not in the loan
Startup costs for a furnished rental commonly land between roughly $10,000 and $40,000 for a small to mid-size home, depending on size, finish level and how much you buy used — and they are typically paid in cash, since neither the bridge lender nor the refinance lender advances against personal property. Plan for furniture and mattresses, kitchen and linens, a lockbox or smart lock, Wi-Fi and a television, outdoor furniture, professional photography, listing setup, a property management or channel-manager subscription, cleaning supplies and an initial reserve for the weeks when the calendar is empty.
Insurance is its own line. A standard landlord policy may not cover transient occupancy; short-term rental coverage or a commercial policy is normally required, and the lender will want to be named. Confirm coverage before the first guest, not after the first claim.
A worked example
Take a $240,000 purchase needing $40,000 of work in a market where the finished property appraises around $340,000. A bridge loan at 85% of purchase plus 100% of rehab in draws advances roughly $244,000; you bring about $36,000 plus closing costs, then $25,000 for furnishing and startup. At an illustrative 11% interest-only with 2 points, points cost roughly $4,900 and interest runs about $1,900 to $2,200 a month as draws fund. Nine months from closing to a stabilized, refinanced property costs somewhere near $22,000 to $25,000 in financing — before taxes, insurance and utilities during the vacancy. Those figures are illustrative ranges to show the shape of the math, not quotes; run your own with actual terms.
The exit: what a DSCR refinance on nightly income requires
Most STR investors exit into a DSCR loan, which qualifies the property on its own cash flow rather than on your tax returns. On short-term rentals, lenders vary widely and their rules move, so treat these as questions to ask rather than facts to assume:
- Which income counts. Some lenders use a documented 12-month operating history, some accept market data reports for a property with no history, and some conservatively qualify on the appraiser’s long-term market rent instead — a large difference in loan amount.
- Coverage ratio. Many programs look for net income at or above the debt service, with better pricing above that; thin coverage means a lower loan or a higher rate.
- Seasoning. A cash-out refinance after a rehab generally requires a period of ownership before the new appraised value can be used — the rule differs between DSCR programs and agency loans.
- Reserves. Several months of payments in liquid funds are commonly required, and often more for short-term rentals than for leased properties.
- Leverage and price. Cash-out leverage on investment property is typically well below purchase leverage, and STR programs often carry a rate premium over the same lender’s long-term rental product.
The conventional alternative is narrower. Agency rental-income rules are built around leases and the appraiser’s rent schedule, so a conventional refinance may effectively value your property as a long-term rental no matter how the calendar performed. Our comparison of DSCR versus conventional and the editorial review of DSCR loans set out the trade-offs; the seasoning mechanics are in our guide on refinancing a rehab.
When hard money is the wrong tool here
If the property is already habitable, already permitted and you plan to hold it, go straight to a DSCR or conventional investment loan — paying bridge pricing for a year on a property that qualifies today is a self-inflicted cost. If the ordinance is unsettled, if the deal only works at peak-season nightly rates, or if the numbers fail as a long-term rental, the short loan term becomes the risk rather than the tool: a balloon payment arrives whether or not the license did.
Claude Loan is an information site — not a lender, broker, property manager or tax adviser. Nightly rates, occupancy and local rules vary by market and change; verify licensing with the municipality and financing terms with licensed lenders, whose status you can check on NMLS Consumer Access.
Frequently asked questions
Can you use a hard money loan to buy an Airbnb property?
Yes, when the property is non-owner-occupied and the purpose is business — that is standard investor lending. The bridge loan buys and renovates; the question that decides the deal is what refinances it afterward.
Will a lender count my projected nightly income?
At the bridge stage, rarely — hard money is priced on collateral and exit. At the refinance stage it depends on the program: some accept a documented operating history, some accept market data, and some fall back to long-term market rent. Ask for the specific rule in writing before you count on a loan amount.
How much cash do I need beyond the down payment?
Enough for furnishing and startup, several months of carrying costs during renovation and ramp-up, and the lender’s reserve requirement at the refinance. Investors who run out of cash at the furnishing stage own a finished house that earns nothing while interest accrues.
What happens if the city bans short-term rentals after I buy?
The loan does not change. Your exit does — which is why underwriting the deal as a long-term rental as well, and keeping that fallback viable, is the standard defense. Research on short-term rental regulation shows how quickly local rules can shift in high-demand markets.
Is a DSCR loan the only exit?
No. Selling the finished property, a conventional investment-property loan if your personal income qualifies, or a portfolio loan from a local bank are all used. The point is to pick one, confirm its requirements early, and keep a second option alive.
Sources
Related: Hard money rates, points and LTV: typical ranges and what moves them, BRRRR: refinancing a hard money rehab into a conventional or DSCR loan, DSCR loans vs conventional for investment property: qualify on rent or on income, Hard money exit strategies: sell, refinance, or hold — and the plan B. Hub: Hard money.