Whether this is your first or tenth home purchase, shopping for a new home is…
Down Payments for Short-Term Rental and Investment Properties
Short-term rental investment properties typically require a 20–25% down payment on DSCR and other business-purpose loans — often at the higher end of that range, because projected STR income carries more uncertainty than a standard lease. Credit, the DSCR ratio, and property type move you within the range.
This page used to answer the general home-buyer version of this question. We have rebuilt it for the people who actually land here now: investors buying rentals and short-term rentals. (If you are buying a home to live in — different loan world entirely; reach out and we will point you the right direction.)
Typical Down Payment Ranges
- Long-term rental (DSCR): commonly 20–25% down on purchases.
- Short-term rental (DSCR): the same range, but lenders more often hold the line at 25% — projected income earns conservative treatment.
- Fix and flip / bridge: structured against purchase price and ARV rather than a flat percentage; your cash-in depends on the deal’s numbers and your experience tier.
What Changes the Required Down Payment
- Credit tier: stronger scores unlock the lower end of the range.
- The DSCR itself: a property that covers its payment with room to spare supports more leverage; a tight ratio pushes the down payment up.
- Property type: condos, 5–8 units, and rural properties often price a step more conservative.
- Experience and reserves: a documented track record and strong post-closing liquidity both help at the margins.
A Concrete Comparison
Same $300,000 purchase, two strategies
| Standard long-term rental at 20% down | $60,000 |
| Short-term rental at 25% down | $75,000 |
| Difference in cash at closing | $15,000 |
That $15,000 gap is the price of projected income. It is also why we underwrite STR deals on long-term market rent whenever the numbers allow — if the deal clears as a boring rental, the STR revenue is upside instead of a requirement.
How Lenders Evaluate Short-Term Rentals
Beyond the down payment, STR files get reviewed on: the property’s cash flow (market rent, booking history, or projections), your reserves (seasonal income means lenders want more months in the bank), your credit profile, and the occupancy assumption — the property must be a true investment you do not occupy. Local STR permits and ordinances get checked too; licensing problems kill more of these loans than credit does.
Buying an STR or Rental?
We arrange DSCR and fix-and-flip financing for investors — and we will tell you the real cash-to-close before you write the offer.
Frequently Asked Questions
What is the down payment on a short-term rental investment property?
Typically 20–25% on DSCR loans, with STRs more often at 25% because projected income is treated conservatively.
Why do short-term rentals require more down than regular rentals?
Projected or seasonal income carries more uncertainty than a signed lease, so lenders offset the risk with more equity and stronger reserves.
Can down payment funds be gifted or borrowed?
Rules vary by lender — some business-purpose programs allow documented gift funds or business capital; unsecured borrowed funds are generally not accepted.
Aspire Mortgage LLC | NMLS #2783873 | 254 N 114th St, Omaha, NE 68154. Equal Housing Opportunity. Aspire Mortgage LLC is a mortgage broker, not a lender; we arrange loans through third-party wholesale lending partners. All loans referenced are business-purpose loans secured by non-owner-occupied investment properties and are not intended for personal, family, or household use. This content is for informational purposes only and is not a commitment to lend. Loan approval, terms, and availability vary by lender, program, borrower qualifications, and state. Not all products are available in all states.
Related Posts
