Low-Cost Financing Options for Your First Short-Term Rental Property
🡐 Back to Resources | August, 2025 | Written by Kurt Russell
Buying your first short-term rental (STR) property can feel overwhelming, especially when it comes to financing. Many new investors assume they need massive savings or perfect credit to get started. The truth is, there are multiple low-cost financing options available that make entering the STR market more attainable than ever.
With the right funding approach, you can secure a property, launch your Airbnb business, and begin generating income without draining your savings. This guide explores the most effective financing paths for first-time hosts and how to choose the one that fits your goals.
Why Financing Strategy Matters for STR Investors
Short-term rentals aren’t just real estate purchases — they’re income-generating businesses. That means your financing approach impacts not just your ability to buy, but also your long-term profitability.
A smart financing plan helps you:
Minimize upfront cash requirements
Preserve liquidity for renovations and amenities
Lower monthly payments and increase cash flow
Scale faster into multiple properties
For insights into long-term portfolio building, see our guide on switching from long-term to short-term rental investments.
Top Low-Cost Financing Options for First-Time STR Investors
1) Conventional Loans with Low Down Payments
While 20% down is standard, some lenders offer conventional loans with 3–5% down for qualified buyers. These work best for owner-occupied properties (renting out a room or secondary unit).
2) FHA Loans
The Federal Housing Administration (FHA) backs loans with as little as 3.5% down. You must live in the property for at least a year, but renting additional units (like a duplex or triplex) is allowed.
Thinking about mixed use? Our article on property modifications for STR success shares ideas.
3) VA Loans
For veterans and active-duty military, VA loans provide no-down-payment options with competitive interest rates. They also allow multi-unit purchases, where you can live in one unit and rent the others short-term.
4) Home Equity Loans and HELOCs
If you own a home, tapping into built-up equity is a powerful way to finance your STR investment. Home equity loans provide lump sums, while Home Equity Lines of Credit (HELOCs) offer flexible, revolving credit.
Need to protect that property too? Read our guide on short-term rental insurance.
5) DSCR Loans (Debt Service Coverage Ratio)
Designed for investors, DSCR loans use the property’s projected rental income to qualify you instead of your personal income. This makes them a strong option for scaling into multiple STRs.
To project accurate revenue, see our Airbnb smart pricing guide.
Grants, Assistance, and Creative Financing Options
Beyond traditional lending, there are creative approaches to reduce upfront costs:
Local housing grants or incentives – Some cities offer funds to encourage tourism-focused rentals.
Partnerships or joint ventures – Team up with an investor who provides capital while you handle operations.
Seller financing – Negotiate directly with the property owner to pay in installments rather than through a bank.
The Risks of Underfinancing
Jumping in without enough financial cushion can create stress down the line. Risks include:
Higher default potential if occupancy dips
Limited reserves for maintenance or upgrades
Difficulty scaling into more properties
The best financing option balances low upfront costs with enough flexibility to weather market shifts.
The Clear Stay Advantage
At Clear Stay Properties, we don’t just manage short-term rentals — we help investors start smart. Our team:
Connects you with financing resources and lender partners
Provides accurate revenue projections using local data
Guides you on staging, amenities, and essential STR upgrades
Manages your property post-purchase to maximize returns
With Clear Stay, you get more than management — you gain a strategic partner invested in your financial success.
The Takeaway
Financing doesn’t have to be a barrier to short-term rental investing. From FHA and VA loans to DSCR financing and HELOCs, there are many ways to secure your first property without a massive down payment. The right plan lets you preserve capital, minimize risk, and maximize returns.
Every great guest experience begins with a smart plan. Complete the form below for your free consultation, and our team will show you exactly how to take your property to the next level.
