If you’re looking to invest in a short term rental property (STR), you’ve likely asked the golden question: Can I buy with just 15 percent down? The short answer? Sometimes, but it depends.
At Rabbu, we’ve seen growing interest from buyers hoping to invest in Airbnb or vacation rentals with a low down payment. Some of our lender partners do offer 15 percent down payment loans, but there are a few key things every buyer should understand before pursuing this route.
15% Down Loans: Rare But Possible
While 15% down payment loans exist, they are relatively rare, especially for short term rentals. Most lenders require a minimum of 20% to 25% down for STRs. Here’s why:
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Higher Risk Means Higher Rates: Lenders that do offer 15% down loans often add a risk adjustment, meaning a higher interest rate. That increased monthly payment can make it difficult for a property to cash flow, since both the principal and interest rate are higher.
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Property Type Matters: Lenders have had success making 15% down loans work for duplexes or distressed properties that were purchased well below market value. These types of properties tend to cash flow better, even with higher mortgage payments.
STR vs. LTR Lending Guidelines
Some lenders offer 15% down options for long term rentals (LTRs), but not for STRs. That’s because underwriting guidelines vary:
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Long Term Rentals: More favorable loan terms due to more predictable revenue, and lenders can often use projected rental income based on current lease comps.
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Short Term Rentals: Tighter guidelines, especially when it comes to revenue projections. Some lenders won’t underwrite based on revenue projections unless the buyer puts down at least 25%.
What Buyers Should Know Before Applying
If you’re looking for a 15% down payment loan, here’s how to prepare:
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Be Flexible: Some lenders may require 20% or more for STRs, especially if the property is in a vacation market or lacks traditional rental history.
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Expect Higher Rates: Your monthly mortgage may be higher, so your STR needs to generate more revenue to maintain positive cash flow.
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Bring the Right Property: Duplexes or below market purchases may be more likely to work with lower down payments.
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Know That Guidelines Vary: Not all lenders offer this option, but some do and Rabbu can connect you with them.
The Importance of Education
One of the biggest frustrations our lending partners report is when buyers approach them with unrealistic expectations. While we encourage exploring all financing options, it’s important to know what’s realistic in today’s market.
If you’re hoping to use just 15% down to buy a vacation rental, we recommend working with an experienced lender who can explain your options, help you understand what property types may qualify, and even help you reposition your loan if needed.
How Rabbu Can Help
Rabbu works with multiple lender partners who specialize in short term rental financing. Some of them offer 15% down loans, but all of them can help guide you through the process with realistic expectations.
We also provide buyers with tools to analyze STR cash flow, connect with expert agents, and track the best investment ready properties.
Final Word
While 15% down loans are possible, they come with tradeoffs. Understanding the real world constraints can save you time and frustration and set you up for a smarter investment. Want to connect with a lender who can help? Start your search on Rabbu and we’ll match you with one of our STR financing experts.
