Short-term rentals can make up to 30% more revenue each year than typically leased properties, but higher operating costs—often taking up to 50% of revenue—can easily eat into those profits. For brokers who help investors, it's important to know how these real-world factors affect financing options so you can structure deals that make financial sense beyond just the surface-level returns.
The rental market is changing in late 2025, because interest rates are going down and investors are becoming more confident. Both short-term and long-term rental investments are becoming more popular again. The hard part is finding the correct financing structure for each investor's strategy, cash flow goals, and level of risk tolerance.
This guide makes that choice easier. We’re going to compare short-term and long-term rental financing, lists the best loan possibilities for each strategy, and teach brokers how to present these options in a way that makes it easy for investors to go from opportunity to financed agreement quickly and clearly.
Market snapshot
- The Fed started to ease rates in September (by 25 bps), and most banks also lowered their prime rates. Markets expect more cuts through the rest of the year and into 2026.
- Mortgage rates decreased to the mid-6% range in late September, but they can still change with treasury yields and inflation expectations.
- Investor behavior: more purchasers are considering buying, refinancing, and building up their portfolios because of better liquidity options and higher sentiment (RCN Capital's ISI bounced back in Summer 2025).
This combination is sure to lead to more business for brokers, but it also makes things more competitive. Presenting clear rental property financing options that match timing, risk tolerance, and exit plans help convert leads into closings.
Short-Term vs Long-Term: head-to-head
The first step in comparing rental property loans is to understand that there are various ways to invest, each that require different types of funding.
1. Income potential
- Short-term rentals (STRs) usually generate more revenue overall. In fact, many markets show that STRs make 20–50% more than long-term leases in a similar time period. Data shows that the average yearly revenue for STRs in some markets is close to $43,800, while the median annual revenue for long-term rentals is around $24,636.
- Long-term rentals, on the other hand, offer a consistent monthly income stream and predictability, which is appealing to passive investors and lenders who prioritize debt-service coverage ratios.
2. Operating costs & management
- STRs have higher operational costs because they need to be furnished, cleaned frequently, provide guest services, pay platform fees, and incur management fees that typically range from 15% to 30%. The total operational expense ratio for STRs is generally close to 50% of their income.
- Long-term rentals offer lower turnover and administration costs (about 8–12% of rent) and lower maintenance expenditures as a percentage of revenue (around 1–2% per year).
3. Occupancy and vacancy risk
- The occupancy of STRs changes with the seasons and the area (national averages for occupancy in 2025 are about 50–55%).
- Long-term rentals usually have occupancy rates exceeding 90%, which means that their revenue is not as affected by vacancies.
4. Regulatory and tax environment
- In many locations, STRs have to deal with more local rules, licenses, and lodging taxes. These are compliance concerns that can affect cash flow and investment value.
- There are standards for tenants and rent for long-term rentals, but underwriting is easier because the rules are more consistent and predictable.
5. Financing and insurance
- It's harder to get STR financing since underwriters want proof of occupancy history, dynamic pricing models, and often ask for higher down payments.
- Lenders see long-term rentals as less risky because they can count on steady rental income. Ways to finance them include traditional rental mortgages, DSCR loans, portfolio loans, and multifamily products.
Rental Loan Types Brokers Should Know
- DSCR loans: Underwriting based on income that looks at property cash flow. Best for landlords who want to acquire and hold, and care about long-term yields.
- Conventional investment mortgages: Lower prices for experienced investors with good credit and secure leases; good for long-term rentals.
- Portfolio loans: Bundle multiple properties into one note—efficient for high-volume investors seeking simplified servicing.
- Hard-money / bridge loans: Fast, asset-based funding for acquisitions, rehab, or auction buys where speed matters. Ideal for STR conversions or flips that later refinance.
- Construction / ground-up financing: For developers who are building rental properties, employ staged draws and keep a close eye on the cost to finish.
- Adjustable-rate & hybrid ARMs: Useful for managing short-term rates when there is a planned refinance.
Which Loan Fits Which Strategy?
Short-Term Rental (STR) Investors
- Typical financing: buy with hard money or a bridge loan, then refinance to a permanent loan if income stabilizes and the property has a good occupancy history.
- Lenders will demand proof of expert management, a history of occupancy and revenue, a complete P&L, and assumptions about dynamic pricing.
- Short bridge or hard money loans are best for quick cash, but if you want to hold on to the property for a long time, a DSCR or standard mortgage is optimal.
RCN Capital's Bridge Loan Program:
- Terms: 12-18 months, matching typical short-term rental business cycle planning
- Rates: Starting at 9.24% reflecting the shorter duration of the loan
- LTV: Up to 80% purchase and 75% refinance, enabling reasonable leverage
- Speed: 24-hour pre-approval decisions which support competitive acquisitions
Long-Term Rental (LTR) Investors
- Typical financing: DSCR or conventional mortgages with predictable amortization and lower rates.
- Lenders will want: lease history (or comparable market rents), conservative DSCR modeling, and adequate reserves.
- Best match: DSCR loans for cash-flow-first underwriting; portfolio loans for scale.
RCN Capital's Long-Term Rental Program:
- Terms: 30 years, providing maximum payment stability
- Rates: Starting at 5.50% among the most competitive in private lending
- LTV: Up to 80% purchase/refinance supporting strong leverage
- FICO: 680 minimum, reflecting reasonable credit requirements
How to Present Financing Choices to Investors
- Start with a short pre-triage (5–10 minutes): talk about the sponsor's experience, the target exit (hold vs. flip), the reserves, and do a quick rent/ARV sanity check.
- Show side-by-side comparisons: net cash flow, cash-on-cash return, IRR, and break-even scenarios for short-term vs long-term financing. Numbers win decisions.
- Standardize submission packets: purchase agreement, rent comps, management agreements (if STR), rehab budgets, sponsor profile, and draft HUD. Standardization speeds up the underwriting process.
- Be transparent on costs: show the real cost of capital (interest, fees, and carrying) and how it affects net proceeds. When making models for STRs, make sure to include extra expenditures for running the business and following local rules.
- Plan the refinance path: if you are utilizing bridge or hard money, make a model of when they will be able to refinance and how long it will take to get lower-cost, long-term financing.
Explore Rental Financing Solutions with RCN Capital
Brokers can provide value as reliable advisors by properly explaining an investment’s financial results, loan conditions, and exit plans for each strategy. RCN Capital has a broad range of rental financing options that make that achievable. Brokers can help every investor find the right plan by offering both short and long-term financing options.
Go to the RCN Capital Broker Page to learn about the lending programs, tools, and resources that will help you close more deals quickly and with confidence.