The Quick Read: Cash to close on a $500K Airbnb purchase is the down payment plus closing costs, prepaids, and escrow deposits, with reserves verified separately in the bank after closing, and on the strongest files the down payment alone is a quarter of the price, though the exact amount varies by scenario.
- Short-term rental purchases reach up to 75% LTV on the strongest files, which is 25% down, subject to lender guidelines.
- A 640 minimum credit score and about 12 months of hosting history are typical expectations for this property type.
- A low appraisal, thin coverage, or weaker credit lowers leverage, and that raises the cash you bring.
- Reserves commonly sit around 6 months of PITIA. They are verified, not spent, and they vary by lender, loan size, and strategy.
- Furniture, permits, and launch costs sit outside the loan and come on top of cash to close.
Key Terms Defined
Down payment: the share of the price the lender does not finance, set by the LTV the file qualifies for.
Cash to close: the total you wire at the closing table, including the down payment, fees, prepaids, and deposits, minus credits and earnest money already paid.
Prepaids: costs paid in advance at closing, such as the first year of insurance and interest from closing day to month-end.
Reserves: verified liquid funds, measured in months of PITIA, that you still hold after closing.
PITIA: principal, interest, taxes, insurance, and any HOA dues, which is the monthly obligation the DSCR ratio is measured against.
Setup capital: money you spend to make the property bookable, such as furnishings, which the loan does not cover.
Short-Term Rental Calculator
Run the STR numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your nightly rate, occupancy, taxes, and insurance for a more accurate picture.
Short-term rental income is documented with a 12-month history or a market data report. Program parameters update from Lendmire’s centralized guideline source.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Nightly rate, occupancy, taxes, and insurance are editable estimates. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
What Is the Down Payment on a $500K Airbnb?
Across the wholesale network of DSCR lenders that Lendmire places files with, short-term rental purchases top out at 75% LTV. Most borrowers should plan around that ceiling rather than count on anything better.
Leverage depends on the file. A high score, strong coverage, and documented hosting history sit at the top of the range. Credit nearer the 640 minimum, a coverage ratio close to the floor, or a property with a thin booking record usually lands lower. Each step down in LTV moves the same share of the price from the loan to your account.
LTV applies to the lesser of the purchase price or the appraised value. If the appraisal comes in below the contract price, the lender works from the lower number, and you cover the gap. A $500K contract that appraises lower than $500K costs more cash than the percentage alone suggests. Experienced buyers keep a cushion for this, because it is a common reason cash to close runs over the first estimate.
The pattern holds in the other direction too. If you want more cash flow room, a larger down payment lowers the monthly obligation and can lift the DSCR. It never erases the leverage caps, the credit floor, the reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Short-term rental purchase files here run on a 1.00 coverage floor. Many select programs start at 1.00, and a separate path through select lenders in the network goes below 1.00 with leverage and terms adjusted. That second path usually means more cash from the buyer, not less.
Closing Costs, Prepaids, and Escrows Line by Line
Closing costs on a DSCR purchase are a stack of separate items, and none of them is the down payment. They typically include lender and processing fees, the appraisal, title and settlement charges, recording fees, and any attorney fees your state requires. The cost of setting up an LLC sits on top of that. Entity ownership is possible, subject to lender program eligibility.
Prepaids are a second layer. They include the first year of homeowner’s insurance paid in advance, interest from the closing date to the end of that month, and the starting balance of the tax and insurance escrow. A closing near month-end shrinks the interest portion. A closing early in the month grows it.
Consumer mortgage paperwork draws the same line between these items. The CFPB’s Closing Disclosure explainer states that total closing costs exclude the down payment and that “cash to close” is a separate figure. DSCR loans are business-purpose investor loans and are exempt from the consumer disclosure rules, so a DSCR closing statement may look different. The underlying math is still the same: price minus loan, plus costs, plus prepaids, minus credits.
Two items reduce the cash you wire. Earnest money you already paid at contract is credited toward the total. Seller credits also reduce it, up to the limits a given program allows. Neither one reduces the down payment itself.
Smaller loans feel fixed fees more than larger ones, because many charges are flat. At a $500K price and 75% LTV, the loan sits in a middle band where fees are meaningful but not extreme. Ask for an itemized estimate before you order the appraisal so you can see each line. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Reserves: Verified, Not Spent
Reserves are not a fee. They are proof that you can carry the property after closing, and they stay in your account. On short-term rental files, reserves commonly sit around 6 months of PITIA, though the number varies by lender, leverage, loan size, and transaction type. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived. Larger loans typically step up to about 9 months.
The trap is simple. An investor who puts every liquid dollar into the down payment can fail the reserve test even though the deal clears the coverage ratio. Plan liquidity as two buckets: cash that leaves your account at closing, and cash that must remain after it.
Reserves are measured on your verified assets, so the statements matter. The funds must be yours, or come from an allowed source such as proceeds from a cash-out refinance on another property you own, depending on program. Borrowed money that creates a new unsecured debt generally cannot serve as the down payment. Scotsman Guide notes that a cash-out refinance on one property can fund the down payment on a new purchase, and that DSCR loans are non-QM products whose requirements vary from lender to lender.
The Costs Outside the Loan
Furnishing is the cost most closing estimates leave out. A short-term rental needs beds, linens, kitchen supplies, and décor before the first guest arrives. Photography, smart locks, listing setup, and a small operating float for the early weeks also come from your own pocket. The loan does not finance any of it.
There is no reliable single figure for this, because it depends on bedroom count, finish level, and market. The practical advice is to budget it as its own line next to cash to close and not let it eat into reserves.
How the Income Test Changes the Cash You Bring
The income method changes your cash because it changes the leverage and the ratio. Short-term rental purchase files can be qualified several ways: an appraiser’s rental analysis, a trailing statement of actual bookings, bank statements showing deposits, or a market projection from a data vendor. Programs differ on which they accept.
Many lenders adjust projected short-term income downward before running the ratio, because bookings are volatile. AirDNA’s financing guide says lenders may use more conservative estimates for that reason, and that DSCR loans often need larger down payments than conventional loans. A property that looks strong on a booking projection can look thinner after that adjustment.
Appraisals add another wrinkle. Standard appraisal rent schedules, known as Form 1007 for single-family homes and Form 1025 for two-to-four units, measure long-term rent. That figure is often well below short-term income. If a program leans on the 1007, a property that works on nightly rates can fall short on paper. Ask early which income method the lender uses, and what happens if the rent survey comes in low.
Clearing 1.00 on the ratio does not mean the property has positive cash flow. The DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, supplies, and capital expenses all sit outside the calculation. Treat the ratio as a lender’s test, and run your own operating budget separately.
For a deeper look at how hosting records feed the file, see Lendmire’s piece How Much Twelve Months of Airbnb History Supports a DSCR Cash-Out.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Three Files, One $500K Property
The same property can need very different amounts of cash depending on the file. This table compares three versions without converting percentages into dollars. The illustrative calculator on the site can translate the percentages into dollars for your own numbers.
| Factor | Strong file | Low appraisal | Thin coverage |
|---|---|---|---|
| LTV on purchase | Up to 75% | Up to 75% of lower value | Lower, lender-set |
| Down payment | 25% of price | 25% plus the value gap | More than 25% |
| Closing costs | Standard stack | Standard stack | Standard stack |
| Reserves | Around 6 months | Around 6 months | Often higher |
| Total cash need | Baseline | Baseline plus gap | Baseline plus extra equity |
The first column is the best case, not the average. The second shows why a cushion matters. The third shows why a weak ratio is a signal about the property, since the sub-1.00 route through select lenders trades leverage for approval.
When the General Rule Breaks
A few situations push the cash number away from the standard pattern.
- Refinance instead of purchase. A short-term rental refinance needs actual hosting history, and cash-out on short-term rental collateral tops out at 70% LTV. That is a different calculation from a purchase. Lendmire’s piece How Much Less an Airbnb Cash-Out Yields at Three to Six Months Owned covers it.
- No operating history. A purchase can rely on projections and an appraiser’s analysis, but expect lenders to look closely at the 12 months of hosting experience they usually want from the borrower.
- Larger loans. Reserves usually scale up with loan size. That matters less at $500K than at $2,500,000 and above, where the network generally holds to 30-year fixed structures.
- Property type. Manufactured homes, log homes, and barndominiums are not offered through these programs, so a unique cabin build can rule itself out before cash is even discussed.
- Maximum leverage is not always minimum cash. A file that stretches to the highest LTV can carry stronger reserve and credit requirements, so the total liquidity need may not drop as much as the down payment suggests.
For the full picture of how these loans fit together, the complete DSCR loans guide walks through programs, ratios, and documentation.
When the Cash Leaves Your Account
Cash leaves in stages, and the order helps with planning.
1. Earnest money goes out when the contract is signed and is credited at closing.
2. The appraisal fee goes out when you order the appraisal.
3. Proof-of-funds statements are gathered while the file is reviewed, and large unexplained deposits need documentation.
4. Cash to close goes out at the table, covering the down payment, fees, prepaids, and escrows, minus credits.
5. Furnishing and launch costs follow after you own the property.
6. Reserves remain in your account the whole time.
A short list for the final stretch: review the settlement statement line by line, confirm wire instructions by phone before sending funds, and keep the appraisal-gap cushion available until the value is confirmed.
Frequently Asked Questions
Can I buy a $500K Airbnb with a DSCR loan and nothing down?
Not in practice. The lender requires real borrower equity, and short-term rental purchases top out at 75% LTV on the strongest files. Programs that allow a lower down payment on other property types do not extend that to this one. Equity you already own elsewhere, such as proceeds from a cash-out on another property, can be the source of the down payment.
Do reserves count as cash to close?
No. Reserves are funds you must still hold after closing, usually around 6 months of PITIA, though the number varies by lender, leverage, and loan size. They are verified on your statements but not spent. Plan for them separately, because a file can fail on liquidity even when the down payment is fully funded.
What happens to my cash if the appraisal comes in low?
The loan amount shrinks, because LTV applies to the lesser of price or appraised value. You then cover the difference between the contract price and the loan, which raises cash to close. Some buyers renegotiate the price, and others bring the extra equity.
Can closing costs be rolled into the loan on a purchase?
Generally no. Closing costs, prepaids, and escrows are part of the cash you bring, and the loan amount is set by LTV on the price or value. Seller credits can offset some costs, subject to program limits.
Does a higher down payment make the loan easier to get?
It can lift the DSCR by lowering the monthly obligation, which helps files near the coverage floor. It does not override credit minimums, reserve rules, or property eligibility. The strongest files have both enough equity and enough rental coverage, subject to lender guidelines.
Next Step
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a DSCR-focused mortgage broker with investor programs across 41 markets including Washington, D.C., can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Qualification is subject to lender guidelines, and this article is not a commitment to lend.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. CFPB Closing Disclosure explainer
2. Scotsman Guide: Reach real estate investors by becoming an expert in these loans
3. AirDNA: How to finance your vacation rental
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a 40-Year IO DSCR Loan Cuts the Payment vs. 30-Year Fixed · DSCR vs Conventional Investment Loan for an Airbnb Property · DSCR vs Conventional Airbnb Loan Requirements on a 2-4 Unit Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.