Thinking about turning a second home into a short-term rental business?
In 2025, vacation rentals remain one of the most lucrative asset classes for real estate investors. But with tighter regulations and higher mortgage rates, financing a vacation rental requires more than a good location—you need the right loan strategy.
This guide breaks down how to finance a vacation rental investment in today’s market, the best lending options, and how Park Place Finance can help you get started.
Start your application with Park Place FinanceUnderstand the market: Why vacation rentals still perform
Short-term rentals (STRs) remain in high demand in major U.S. destinations. Remote work and travel flexibility are driving longer stays and higher occupancy rates.
What makes vacation rentals attractive?
- Cash flow potential: In the right markets, STRs can generate significantly more gross monthly income than long-term rentals—sometimes doubling revenue, depending on occupancy and local demand.
- Tax benefits: Investors can deduct depreciation, property management, and travel expenses.
- Diversification: Adds a new income stream to your portfolio.
In addition, owning a vacation rental can offer personal use benefits—investors often block off time to enjoy their property in peak or off-peak seasons.
And unlike long-term tenants, STR guests are less likely to cause lease or eviction issues, offering more flexibility for owners.
But profit depends on proper financing. That’s where DSCR loans come in.
Use DSCR loans to qualify based on rental income
A debt service coverage ratio (DSCR) loan is a type of real estate investment loan that is approved based on property income, rather than your W-2 income or tax returns.
DSCR loan highlights for vacation rentals:
- No personal income verification required
- Based on projected or actual rental income
- Lower documentation burden than conventional loans
- Available to first-time investors and LLCs
This means that even if you’re newly self-employed or scaling your portfolio, you may still qualify based on the deal, rather than your debt-to-income ratio.
Park Place Finance offers DSCR loans specifically structured for rental properties, including short-term vacation rentals.
Pro tip: Use data from AirDNA or similar tools to forecast monthly income and boost your DSCR.
The interest-only advantage of DSCR loans
Additionally, many DSCR loan programs now permit interest-only payments, which frees up more cash flow during the early years of ownership.
This can be a smart move if you’re reinvesting in the property’s furnishings or marketing efforts.
How to qualify for a vacation rental loan in 2025
Getting approved in today’s market comes down to two key factors: property performance and thorough documentation.
Here’s what you’ll typically need:
- 20% to 25% down payment
- Property appraisal, including rental comps
- STR income projections (AirDNA, PriceLabs, or historical Airbnb performance)
- DSCR greater than 1.0 (your gross income must exceed your monthly expenses)
Some lenders, including Park Place Finance, may allow a DSCR as low as 0.75 for strong-credit borrowers or if the market shows high STR performance potential. That gives you flexibility if your property is still ramping up bookings.
STR Income
If you already own investment properties, having documented STR income—even just a few months—can improve your leverage and access to better terms.
Where to invest: Vacation rental hotspots in 2025
Not all markets are equal. Local regulations, seasonality, and guest demand matter.
Park Place Finance lends in many STR‑friendly states, including Texas (Austin, San Antonio, Dallas), Florida, and California.
Through our DSCR program, we support rental property financing in 42 states across the U.S.
When evaluating a location, look at:
- Tourist traffic year-round
- Local STR rules (some cities require permits, others restrict STRs entirely)
- Average daily rates and occupancy rates
You should also consider local event calendars—cities that host conventions, sports events, or seasonal festivals often provide consistent off-peak bookings.
A property in a city with consistent tourism and clear STR laws is more likely to succeed and retain value over time.
Why Park Place Finance is your go-to lender for STR investors
Park Place Finance is a direct private lender that specializes in fast, investor-friendly financing.
What sets us apart:
- Experience with short-term rental underwriting
- Fast closings—often as little as 14 days
- LLC-friendly loan structuring
Unlike banks, Park Place Finance works with both experienced investors and first-timers.
They’re familiar with STR-specific risks and revenue patterns, which allows for more flexible underwriting.
Don’t forget: STR regulations matter
Many cities are cracking down on short-term rentals like those offered by Airbnb.
Before buying, research:
- Zoning restrictions
- Permit or registration requirements
- Occupancy caps or minimum night stays
Local government policies can impact your ability to operate legally.
A property that performs well today could face bans or limitations tomorrow. Stay ahead by reading municipal codes and connecting with STR-friendly local agents.
Check HOA bylaws—many prohibit short-term stays altogether, even in STR-legal cities. If your city has STR bans, consider mid-term rental strategies (30+ day stays) for travel nurses, remote workers, or digital nomads.
FAQ: Vacation rentals for real estate investors
Yes. With DSCR loans, you can often qualify based on projected Airbnb income using data from tools like AirDNA—or actual income from past rental history, when available. Lenders will typically review rental comps and market data to validate income assumptions.
You don’t need an LLC to apply, but Park Place Finance requires that all investment property loans close under an LLC. This structure offers asset protection and aligns with most investor lending standards.
Park Place Finance can close DSCR loans in as little as 14 days, depending on documentation and appraisal timelines.
Typically 20% to 25%, depending on credit, property type, and market conditions.
Financing smart in 2025
The vacation rental market still offers strong returns, but only if you plan strategically.
With higher interest rates and tighter regulations, your success depends on:
- Buying in STR-friendly cities
- Using DSCR loans to finance based on rental income
- Partnering with a lender that understands short-term rentals
You’ll also want to build a professional support team—from CPAs who understand STR tax treatment to property managers who can maximize reviews and occupancy.
Park Place Finance makes vacation rental investing accessible, even to first-time buyers and those from out of state.