Posted 3 months ago

Long-term vs Short-term Rental Loans

Buy and Hold Strategy

Buy and Hold is a common feature in the property market that people invest with the intention of holding a home for a long period of time. Here, the investors expect to get a monthly rental income as well as future appreciation of the property. Those looking to buy and hold will find long term rental loans suitable for their home purchase scheme. This strategy is considered to be relatively easier than flipping properties since one does not have to be experienced. You can just hire a property manager, if needed, for the purposes of managing the home. Beginners will find it a perfect strategy to get into the real estate business. Likewise, experienced investors who are looking at building wealth over time through equity buildup and property appreciation will find buy and hold a good approach to investment. The beauty of it is that there is a form of financing which will help them towards this end which are the long-term rental loans.

Long-term rental loans

If you are an investor looking to buy investment properties of a given unit for the long term, this financing option is the best choice for you. It is a buy and hold strategy where you buy the property and hold it for some time. The terms available are 5/1 ARM, 7/1 ARM and 30 year fixed loans. With a long-term rental, a 12 month signed lease is required for most products. The benefit to this route is that you get rates lower than if it were short-term and also less worry about having to find a tenant every other month. It's a 12 month guaranteed income.

Properties eligible for long-term rental loans

Although there might be slight variation depending on the financial institution that you approach for long-term rental loans, these are some of the properties that are eligible for this type of home financing:

  • Single Family Residence which must not be owner-occupied
  • 2-4 Unit Properties
  • Warrantable and Non-Warrantable Condos

Short-term rental loans

These are usually known as vacation rentals or Air BnB properties. Unfortunately because the income is not guaranteed to be consistent, we are unable to use the income produced in order to qualify for a lease-required product. It is still definitely possible to do it though! The rates are a little bit higher than if a 12-month lease was in place,  but cash-flow on these properties tend to be a lot more than in long-term rentals making it a very sought after investment strategy for both new and seasoned investors. 

Properties eligible for short-term rental loans

These are some of the properties that are eligible for this type of home financing:

  • Single Family Residence which must not be owner-occupied
  • 2-4 Unit Properties
  • Warrantable and Non-Warrantable Condos

While deciding between a long-term vs short-term rental, I suggest you take a few things in consideration:

-Monthly rental income comparison. Is it a lot more for short-term? if not, then long-term is a better option.

-Is interest rate very important to you? Then long-term will give you a better rate.

-Is the property in a highly-sought after area? Then short-term is probably a better option.


The main differences tend to be, short-term rentals provide more income but is more work and higher rates. Balance out the pros and cons and see what works better for you. 



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