How to Pull Equity from Your Short-Term Rental (STR) Property
Owning a short-term rental (STR) property through platforms like Airbnb or Vrbo can generate strong cash flow, but your property’s equity is just as valuable. If you need funds for renovations, debt consolidation, or new investments, pulling equity from your STR can help you leverage your property’s value without selling it.
This guide explores the best ways to access equity from your STR, the pros and cons of each method, and how to determine which option is right for you.
What Does “Pulling Equity” Mean?
Equity is the difference between your STR’s market value and your outstanding mortgage balance. For example:
- Your STR is worth $500,000
- Your remaining mortgage balance is $250,000
- Your total equity is $250,000
Pulling equity means tapping into that $250,000 and converting it into usable cash without selling your property.
Best Ways to Pull Equity from Your Short-Term Rental
1. Cash-Out Refinance – Best for Large Sums & Lower Interest Rates
A cash-out refinance allows you to replace your existing mortgage with a larger loan and take the difference in cash.
🔹 How It Works:
- Your STR is worth $500,000
- Your current mortgage balance is $250,000
- A lender offers a new loan at 75% Loan-to-Value (LTV) → $375,000
- After paying off your old mortgage ($250,000), you walk away with $125,000 in cash
🔹 Pros:
✔ Lower interest rates than other loan types
✔ Access to large sums of cash
✔ Can extend the loan term for lower monthly payments
🔹 Cons:
❌ Higher loan amount = higher monthly payments
❌ Requires closing costs & appraisal fees
❌ Can take 30–60 days to close
Best For: STR owners who want large amounts of capital at the lowest possible interest rate.
2. Home Equity Line of Credit (HELOC) – Best for Flexible Access to Funds
A HELOC is a revolving line of credit secured by your STR’s equity. It works like a credit card—borrow as needed, repay, and borrow again.
🔹 How It Works:
- A lender approves a HELOC up to 75-80% LTV
- You get access to a credit line (e.g., $100,000)
- You only pay interest on the amount you use
🔹 Pros:
✔ Flexible borrowing – take money only when needed
✔ Lower closing costs than a refinance
✔ Interest-only payment options available
🔹 Cons:
❌ Variable interest rates – payments may increase
❌ Lenders can freeze HELOCs if market conditions change
❌ Smaller loan amounts compared to a cash-out refinance
Best For: STR owners who don’t need all the cash upfront and prefer a flexible borrowing option.
3. Home Equity Loan – Best for Fixed Payments & Predictable Costs
A home equity loan is similar to a HELOC, but instead of a revolving credit line, you get a lump sum loan with fixed monthly payments.
🔹 How It Works:
- A lender offers a loan based on 70-80% of your home’s value
- You receive the full loan amount upfront (e.g., $100,000)
- You repay with fixed monthly payments over 5–30 years
🔹 Pros:
✔ Fixed interest rates & predictable payments
✔ Lower interest rates than personal loans or credit cards
✔ No risk of lender freezing your credit line (unlike HELOCs)
🔹 Cons:
❌ Higher monthly payments than a HELOC
❌ Must take the full loan amount upfront
❌ Loan is secured by your property – risk of foreclosure if unpaid
Best For: STR owners who want a lump sum loan with a fixed interest rate.
4. DSCR Loan (No-Income Loan for STR Investors) – Best for Airbnb Hosts Without Traditional Income Docs
A Debt-Service Coverage Ratio (DSCR) loan is designed for real estate investors and does not require W-2s or tax returns. Instead, lenders qualify you based on your STR’s rental income potential.
🔹 How It Works:
- Lenders look at your STR’s income vs. loan payments
- If the rental income covers the mortgage, you can qualify
- Loans typically allow up to 75% LTV
🔹 Pros:
✔ No personal income verification required
✔ Easier to qualify than traditional loans
✔ Can use projected Airbnb income to qualify
🔹 Cons:
❌ Higher interest rates than conventional loans
❌ Requires strong Airbnb performance records
❌ Not all lenders offer DSCR loans for STRs
Best For: Airbnb hosts who don’t qualify for traditional loans but have strong rental income.
5. Business Line of Credit (BLOC) – Best for Short-Term Cash Needs
A business line of credit (BLOC) is an unsecured credit line that works like a HELOC but doesn’t use your STR as collateral.
🔹 Pros:
✔ No risk to your property
✔ Quick access to funds
✔ Only pay interest on what you borrow
🔹 Cons:
❌ Lower credit limits than HELOCs
❌ Higher interest rates
❌ Requires strong credit history
Best For: STR owners needing smaller amounts of short-term financing without using their home as collateral.
Which Option Is Right for You?
| Method | Loan Size | Interest Rate | Flexibility | Best For |
|---|---|---|---|---|
| Cash-Out Refinance | 💰💰💰 Large | 🔽 Low | ❌ One-time lump sum | Investors needing big capital at low rates |
| HELOC | 💰💰 Medium | 🔼 Variable | ✅ Borrow as needed | Owners who want flexibility |
| Home Equity Loan | 💰💰 Medium | 🔽 Fixed | ❌ One-time lump sum | Owners wanting predictable monthly payments |
| DSCR Loan | 💰💰 Medium-Large | 🔼 Higher | ❌ Lump sum | Airbnb hosts without traditional income docs |
| Business Line of Credit | 💰 Small-Medium | 🔼 Higher | ✅ Flexible borrowing | Short-term cash flow needs |
Final Thoughts: Leveraging Your STR’s Equity the Smart Way
Pulling equity from your short-term rental is a powerful way to fund new investments, renovate your property, or consolidate debt.
Before choosing an option, consider:
✅ Your financial goals – Do you need a large lump sum or flexible credit?
✅ Loan terms & interest rates – Can you afford the monthly payments?
✅ Your STR’s performance – Does your rental income support the loan?
By choosing the right financing strategy, you can grow your real estate business while keeping your Airbnb property working for you.
Thinking about pulling equity from your STR? Have questions? Drop a comment below! 🚀
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