From Joshua Tree to Big Bear and the coastal enclaves of San Diego, California is a premier market for short-term rentals (STRs). The revenue potential of an Airbnb often far exceeds long-term leasing, but traditional lenders struggle to underwrite fluctuating, seasonal income. Savvy investors use specialized financing tailored for the STR market.
Underwriting the Airbnb
Conventional lenders require two years of tax returns showing STR income, making it impossible to finance a new STR purchase. Forward-thinking private lenders use DSCR loans specifically adapted for STRs.
Instead of a standard long-term rent schedule, these lenders use platforms like AirDNA to project the property's average monthly short-term rental revenue to calculate the DSCR.
Market Regulations
Before securing financing, investors must rigorously verify local ordinances. Many California cities have enacted strict STR regulations or outright bans in certain zones.
Lenders will verify that the property can legally operate as a short-term rental before funding based on STR revenue projections.
The short-term rental market offers outsized returns for those who can navigate the local laws and secure the right financing to scale.
Some do require evidence that you have successfully managed an STR before, while others will fund first-time operators with a slightly lower LTV.
Fidelity Funding Corp · Direct California private money lender since 2006
450 N Brand Blvd, 6th Floor · Glendale, CA 91203 · Mon-Fri 8AM-6PM PT