Airbnb Loans: Best Options to Fund Your Rental Business

Running an Airbnb investment property can be lucrative, but it also comes with a wide array of expenses. You’ll first need to find and purchase the property, then you’ll need to fully furnish it. Once that’s done, you’ll need to continually maintain the property, pay rental listing fees, and hire a cleaner in between guests.

An Airbnb business loan can go towards purchasing a vacation rental property, renovating an existing property, or paying for ongoing property-related expenses. While loans specifically for Airbnb’s do not exist, there are plenty of other small business loans that can be used to meet your needs. 

To qualify for an unsecured small business loan, you need to have an income-producing business that’s been in place for at least six months. You can then use the funds from the business loan toward your Airbnb expenses.

In this review, our team of expert reviewers has thoroughly analyzed and evaluated the rates, fees, and terms of hundreds of small business loans. We will share our findings and provide a rating methodology you can use to select the best option for your needs.

Best Small Business Loans for Airbnbs - Full Overview

How to Choose the Best Small Business Loan for an Airbnb

When choosing the best small business loan for an Airbnb, there are many important factors to consider. Our financial experts used the following criteria to rank the best Airbnb lend

• Loan features - Know the loan terms, repayment options, and available loan amounts. If you need an Airbnb loan for $1 million and the maximum loan amount is less, then you need to look elsewhere.
• Application process - What’s the application process like? How invasive and time-consuming is it? Will it affect your credit score or is just a soft credit pull? Does the lender have any distinctive competitive offerings? How long does the application process take and how long until Funding?
• Interest rates and fees - Consider origination fees, appraisal fees, notary fees, and any other fees a lender may charge. We also looked at rates for different types of loans that can be used for an Airbnb.
• Qualification process - Typically, there is a minimum credit score requirement, as well as proof of income. The lender also may want to see tax returns and/or bank statements from the last couple years.
• Customer support - How accessible is customer support? Do they have live representatives and do they offer weekend and evening hours? Is there multi-channel support? Know what supplemental information and tools are available and if there are any specific resources on Airbnbs and vacation rental properties that would be beneficial.
• Online user reviews - Check out independent review sites like Trustpilot to see what previous customers like and don’t like. If there are too many negative reviews, you may want to check out a different lender.
• Perks and bonuses - Consider specified service offerings like payment flexibility, advertising transparency, and advanced technology. Payment flexibility may be important during off seasons when your property is vacant or slower than usual.

Main Features of the Best Airbnb Loans

Check out the table below for a quick summary and comparison of lenders and their borrower requirements.

How to Use Airbnb Business Loans

Airbnb business loans can be used in a variety of ways. Below, we highlight some ways that our experts suggest using these loans:

• Fix up an existing property: Make it Airbnb ready with new flooring, a kitchen remodel, and updated bathrooms.
• Furnish and accessorize: Buy furniture, home decor, and art work to spruce up your space.
• Turn empty space into an Airbnb rental: Fix up your neglected empty bedroom, studio, or mother-in-law suite, and start making rental income from spaces you already have.
• Sublease your space: Rent out your space when you’re out of town and use the Airbnb business loan to paint, make repairs, clean, and maintain the space. Make sure you get the landlord’s permission first.
• Use the loan to landscape: Add grass or pavers, build a sun deck, add a fire pit, or have a hot tub installed to give potential guests the amenities they’re looking for. Airbnbs that offer amenities typically rent more often and for higher prices than those without amenities.
• Purchase a new property: If you’re looking to purchase a brand new Airbnb property, you’ll most likely have to look into alternative forms of financing, such as a second mortgage, a home equity loan, or a personal loan.

What To Consider Before Buying An Airbnb Property

Airbnb rentals have become globally popular, with tourists preferring them over hotels. Still, your success isn’t guaranteed. Here are a few things to consider before purchasing:

• Reputation: Airbnb’s success relies heavily on host involvement with guests. Online reviews can make or break your Airbnb business.
• Maintenance: Will you be able to handle the constant cleaning and maintenance of your property? If not, do you have the resources to hire a property manager?
• Location: You might find a beautiful property, but if it’s not in the right location, you won’t have many bookings. Before purchasing an Airbnb property, do your homework. Check for amenities for tourists such as restaurants, entertainment, public transportation, and more.
• Legality and taxes: Due to the popularity of Airbnb’s and pressure from the hotel industry, some cities have created burdensome regulations for short-term rental properties. Check with the municipality to learn about regulations, licensing, and tax requirements before investing in the property.
• Airbnb rental income: Airbnb income can vary from month to month. According to research, the average Airbnb host earns around $924 a month. Keep in mind that you will more likely earn a larger income in peak seasons than during the off-season. You will need to make provisions for mortgage payments, maintenance fees, and other expenses during the off-seasons.
• Airbnb occupancy: The number of nights your Airbnb is booked versus the number of days available will give you an occupancy rate. A good rate depends on the real estate market, the time of year, and your listing position in the Airbnb market. The occupancy rate helps determine how successful your Airbnb will be.
• Capitalization rate: The CAP rate is a metric used to measure investment return on your rental property. You can calculate this rate by dividing your Airbnb's net operating income by the current market value.
• FICO Score: This score will help lenders determine how likely you are to pay back a loan. A good FICO score is 670 and up. If your score is lower, don't let it deter you from investing in Airbnb since many lenders will still assist you even with a 500 credit score.

Conclusion

Airbnb’s are a popular vacation trend that doesn’t seem to be going away anytime soon. In order to capitalize on this growing market, you may need to obtain an Airbnb loan to help cover some of the associated costs. These loans can be used to help you remodel and furnish existing properties or to purchase real estate to use as Airbnb rentals. Keep your budget in mind, think about location, accessibility, and how easy it will be to manage the property. And then when you choose a lender, keep in mind their rates, terms, fees, and qualifications to make sure you’re getting the loan that best fits you and your needs.