Short-term rental construction loans fund ground-up cabins, pool homes, and vacation-rental product built for nightly income — not a primary residence with a guest suite bolted on. The capital stack is vertical construction draws → certificate of occupancy → permit and furnish → STR ramp → DSCR takeout. Jaken Finance Group originates the construction phase at 8.99%–13.5% interest-only and the permanent hold at 5.75%–10.5% when the asset qualifies as a licensed, income-producing STR.
This page is the build-from-dirt lane in the short-term rental loans cluster. If you are buying an existing house to convert, see STR conversion hard money. If the cabin is already operating, see STR DSCR.
Educational only — not legal advice. Confirm zoning, STR permits, and HOA rules on the parcel before you fund dirt.
Why investors ground-up for STR instead of buying turnkey
Three reasons sponsors choose construction over an existing Airbnb listing:
| Driver | What it looks like on the ground |
|---|---|
| Land basis | Cheaper dirt in Wears Valley, Black Mountain corridor, or Osceola County exurbs versus paying cabin premium on a furnished resale |
| Floor plan control | Sleeps-eight bunk layout, theater loft, and pool spec sized for ADR — not a 1990s ranch with awkward bedrooms |
| Permit timing | New Tourist Residency, Osceola STR registration, or county path on a fresh build when resale permits do not transfer |
Construction is not cheaper than buying. It is slower and more complex — but it can produce a purpose-built STR asset when resale inventory is overpriced or permit-blocked.
Generic ground-up mechanics live on ground-up construction loans no experience and spec home build-to-rent financing. This page adds STR-specific exit, permit, and FF&E sequencing.
Construction vs conversion vs turnkey purchase
| Path | You start with | Construction loan? | Typical timeline to first guest |
|---|---|---|---|
| Ground-up STR | Raw land or tear-down lot | Yes — vertical draws | 12–18 months build + 2–4 months permit/furnish/ramp |
| STR conversion | Existing shell needing rehab | Hard money / bridge, not full GC vertical | 4–9 months rehab + furnish + ramp |
| Turnkey STR purchase | Licensed, furnished listing | No — STR DSCR at close | Immediate if income docs support |
Pick construction when custom product and land basis beat speed. Pick conversion when the shell is sound but ugly. Pick DSCR purchase when the listing already prints TTM revenue.
How STR construction underwriting differs from spec-for-sale
Lenders still size on as-completed value (ACV), loan-to-cost (LTC), and sponsor liquidity — but STR exits add layers spec builders skip:
| Factor | Spec sell-out exit | STR hold exit |
|---|---|---|
| Income proof at takeout | Pending sale contract or comp sell-out | AirDNA, TTM bookings, or 1007 fallback |
| Permit | CO often enough for retail buyer | STR license frequently required before DSCR uses nightly income |
| FF&E | Buyer taste | $40K–$90K+ sponsor budget — not in vertical draw |
| Seasonality | N/A at sale | Winter trough in Smokies, Asheville — reserves matter |
| Insurance | Builder risk policy | STR/hospitality coverage before first guest |
Underwriters want the DSCR takeout modeled at closing — not discovered at CO when winter occupancy kills the refi.
Typical capital stack: land → vertical → STR DSCR
1. Lot control — purchase or equity in land (may be separate land loan)
2. Vertical IO — 8.99%–13.5% construction draws, 12–18 months
3. CO + permit — city/county STR registration where required
4. Furnish — sponsor cash or [Airbnb furniture financing](/airbnb-furniture-financing/)
5. Ramp — 60–120 days to reviews and TTM history
6. STR DSCR refi — 5.75%–10.5% permanent, 30-year fixed or ARMCTA: New construction application · Submit scenario · (833) 264-7776
Draw sequence follows standard vertical milestones — foundation, framing/dry-in, MEP rough, drywall/finish, CO. See guide to construction loans for draw discipline. Never front-load more than 20% before foundation inspection.
What belongs in the construction budget (and what does not)
| In the vertical draw | Sponsor cash or separate note |
|---|---|
| Site work, foundation, framing | Furniture, linens, staging |
| MEP, HVAC, roofing | Hot tub install (sometimes split — confirm with lender) |
| Kitchen/bath build-out | Smart locks, cameras, starter consumables |
| Permits, impact fees, utilities | STR license fees, TPT registration |
| Contingency 10%–15% | Operating reserve through first soft season |
Pool excavation may sit in vertical scope on Florida pool-home STR builds; furniture never does. See STR conversion loans for the same furniture rule on rehab files.
Market-specific build theses (where ground-up STR is common)
Smoky Mountains — Gatlinburg / Pigeon Forge / Sevier County
Cabin product dominates. Financing thesis: budget Tourist Residency or STRU path before CO, sprinkler scope on large chalets, and January cash after leaf season. Ground-up beats resale when Wears Valley land is cheap but furnished cabins on the Parkway are not.
Deep dive: Gatlinburg STR loans · Tennessee product: DSCR Tennessee
Blue Ridge — Asheville / Buncombe corridor
City homestay caps versus county whole-home paths split the thesis. Ground-up in unincorporated Buncombe or Black Mountain may access different STR rules than a downtown city parcel. Seasonality mirrors Smokies — do not annualize fall leaf ADR.
Deep dive: Asheville STR loans · North Carolina product: DSCR North Carolina
Disney corridor — Kissimmee / Osceola pool homes
Four-to-six bed pool spec for nightly guests. HOA minimum-night rules and Osceola STR registration must be in the pro forma before vertical starts. Construction competes with resale pool homes — win on floor plan and energy efficiency, not on skipping the permit queue.
Deep dive: Kissimmee STR loans · Florida product: DSCR Florida
Beach and desert STR (Destin, Scottsdale, Gulf Shores)
Wind/flood engineering on Gulf Coast vertical; Arizona TPT and city license before modeling Scottsdale event-week ADR. Construction timelines include long-lead windows and HOA architectural review.
Deep dive: Destin STR loans · Scottsdale STR loans
Composite example: Smoky Mountain three-bedroom cabin (illustrative)
Sponsor profile: Repeat investor, licensed GC partnership, building on owned lot in unincorporated Sevier County.
| Line | Amount |
|---|---|
| Land (already owned, basis) | $95,000 |
| Vertical hard + soft costs | $285,000 |
| Total project cost | $380,000 |
| As-completed value (appraiser) | $425,000 |
| Construction loan (75% LTC on vertical) | $213,750 |
| Sponsor equity (vertical gap + land) | $166,250 + land equity |
| Construction rate (illustrative IO) | 10.50% inside 8.99%–13.5% band |
| Term | 14 months + 3-month extension option |
Post-CO sequence:
- Month 0–2: CO, Tourist Residency application, bind STR insurance
- Month 2–4: Furnish ($48,000 sponsor cash — not in draw)
- Month 4–8: Ramp bookings; target $40,000 TTM gross by month 8
- Month 10: STR DSCR refi at 75% LTV on $425,000 ACV → $318,750 loan at illustrative 7.25% inside 5.75%–10.5%
| Income method | Annual qualifying | DSCR vs ~$28,800 PITIA (illustrative) |
|---|---|---|
| AirDNA $52,000, 15% haircut | $44,200 | ~1.53 |
| TTM $40,000, 15% haircut | $34,000 | ~1.18 |
| 1007 long-term rent $2,100/mo | $25,200 | ~0.88 — stress test |
The file clears on STR income with haircut; 1007 fallback fails — sponsor carries winter with reserves. That is normal Smokies math. Run your own ratio on the DSCR calculator.
Composite example: Osceola four-bed pool home (illustrative)
| Line | Amount |
|---|---|
| Lot + vertical budget | $410,000 |
| ACV | $465,000 |
| Construction (78% LTC qualified) | $319,800 |
| Sponsor equity | $90,200 + carry |
| Furnish + pool furniture (sponsor) | $62,000 |
| Osceola STR registration + HOA approval | Close conditions before first draw |
Takeout: STR DSCR at 80% LTV on $465,000 → $372,000 permanent. Model LTR fallback at $2,400/mo if HOA or county tightens — see Orlando STR vs LTR DSCR.
When STR construction is the wrong tool
Walk away or reprice when:
- STR is illegal on the parcel (HOA ban, city homestay-only, no permit path)
- ACV minus cost does not support sell-out or DSCR exit at your leverage target
- Sponsor cannot fund FF&E and 6+ months carry after CO through a soft season
- You need speed — turnkey DSCR closes in weeks; ground-up is 14–24 months to stabilized STR income
- First-time builder with no GC — use ground-up no experience checklist; STR exit does not waive vertical risk
Stalled vertical? Mid-construction refinance may apply — but fix the STR permit story before you roll IO forever.
Documentation checklist for STR ground-up
- Plans, specs, budget — line-item with 10%–15% contingency
- Licensed GC — insurance, draw agreement, milestone schedule
- Lot entitlement — zoning confirmation for STR use (city letter or attorney memo)
- STR permit path — application timeline in the construction schedule
- Exit pro forma — AirDNA and 1007 columns side by side
- Entity — LLC vesting, guarantor liquidity for carry + furnish
- Insurance — builder risk during vertical; STR policy quoted pre-CO
Requirements mirror Airbnb loan requirements on the permanent phase — pull permits forward into the construction timeline.
Related guides
| Topic | Guide |
|---|---|
| Full STR product menu | Short-term rental loans |
| Buy and convert existing shell | STR conversion hard money |
| Permanent STR debt | DSCR for Airbnb / VRBO |
| Furnish after CO | Airbnb furniture financing |
| STR compliance | Short-term rental laws for investors |
| Generic ground-up | Ground-up construction no experience |
| Spec / BTR builders | Spec home build-to-rent |
Apply
New construction application · Submit scenario · What kind of loan do you need? · (833) 264-7776
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon receipt of appraisal payment and satisfaction of borrower conditions. All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties. Examples on this page are composite and illustrative.