A short-term rental generally refers to a lease that is either month-to-month, for three months or anything up to six months, while a long-term rental is anything longer than six months.
Nashville is the undisputed champion when playing the short term rental game. The state of Tennessee defines a “Short Term Rental” or “STR” as any property which is leased for under 30 days. If we look within those guidelines, Nashville’s STR market lands 4th overall in the US behind 3 cities in Hawaii as best places to own a STR and has the highest gross overall average revenue in US coming in at a booming $126,331.
There are two types of STR classifications: Non-Owner Occupied (NOO) and Owner Occupied (OO). NOO classification is defined as the intent to rent out the property on a full-time basis. OO is the intent to rent out either part time (when out of town) or the ability to rent out full time if it is a space within the house or attached to the house (like a basement with a separate entrance).
They say there are a million ways skin a cat (which is so gross) but there are really only a few ways to obtain STR financing. Receiving a loan to purchase an STR is completely depending on the use and zoning of the property.
If it is an OO property then you can potentially do a 30 year fixed traditional loan depending on how you claim the use, but the property must be residentially zoned. If it is an NOO property that is where it can get tricky. If you plan to use the property for airbnb solely, most likely it is commercially zoned or an a development where over 50% of the units are rented out. If this is the case you will need to use a different type of financing, usually a Portfolio Loan.
We are resharing this information from our friends at House Haven Realty. If you have any questions or are interested in purchasing property to lease as a Short Term Rental, please reach out! We’re very experienced in helping our clients research, find and purchase investment properties. We’d love to help!