The BRRRR Method for Short-Term Rentals

What Is The BRRRR Method?

BRRRR is an acronym standing for Buy, Rehab, Rent, Refinance, Repeat. It is a real estate investment strategy that transforms below-market properties into income-producing assets, then leverages refinancing to recover your initial capital and repeat the cycle.

The Five-Step Cycle

1. Buy: Acquire a property below market value (distressed, estate sale, foreclosure, motivated seller)
2. Rehab: Renovate strategically to increase After-Repair Value (ARV) and rental income potential
3. Rent: Operate as a short-term rental to maximize monthly revenue and cash flow
4. Refinance: Cash-out refinance at 75-80% of the new appraised value to recover invested capital
5. Repeat: Take the recovered cash and deploy it into the next deal, compounding your portfolio

Why BRRRR Is Powerful With Short-Term Rentals

BRRRR works with both long-term rentals (LTRs) and STRs, but STRs amplify returns exponentially:

• Revenue: 2-3x higher — STRs at $200-$250/night average $6,000-$7,500/month vs. LTR at $1,500-$2,500/month
• Refinancing: More aggressive — Lenders evaluate DSCR loans based on NOI, making higher property values refinanceable
• Cash-on-cash return: Exceptional — A $18,750 net investment generating $1,900/month = 121.6% annual return
• Tax advantage: Dramatic — The STR loophole allows depreciation losses to offset W-2 income, creating $25,000-$30,000 tax savings per property per year

Traditional BRRRR investors (LTR-focused) might see 8-15% annual returns. BRRRR + STR + tax optimization can exceed 50% annualized returns when you factor in cash flow, equity buildup, appreciation, and tax savings.

Executive Summary: BRRRR + STR Is the Ultimate Wealth-Building Strategy

From a CPA's perspective, BRRRR combined with short-term rental operation and the STR loophole is the most tax-efficient wealth-building strategy available to investors. Here is why:

Wealth Creation on Three Fronts

1. Cash Flow: STRs generate $1,500-$2,500/month net cash flow per property. Scale to 4-5 properties and you have $6,000-$12,500/month passive income (plus principal paydown).
2. Equity Buildup: Every mortgage payment builds equity. Refinancing at 75% LTV means you keep 25% equity permanently. Over 10 years, this compounds into substantial net worth.
3. Tax Deductions: Through cost segregation, bonus depreciation, and the STR loophole, investors generate $25,000-$50,000 in tax deductions per property per year, sheltering W-2 income from taxation.

The Compounding Effect

Year 1: Buy 1 property, invest $250K, refinance $232K recovered, tax savings $29K.

Year 2: Buy 2 properties using your recovered capital + cash flow, now own 3 properties, tax savings $87K.

Year 3: Buy 2 more properties, now own 5 properties, monthly cash flow $10,000+, tax savings $145K, equity buildup $50K+.

By year 5, you could own 10+ STR properties generating $300,000+ annual net worth increase through equity buildup alone, while sheltering $150,000+ of W-2 income from federal taxation.

This is why BRRRR + STR + tax strategy is the most powerful long-term wealth builder available.

The 5 Steps of BRRRR (Detailed Breakdown)

Step 1: BUY — Finding & Acquiring the Right Property

The buy phase is critical. You need to acquire a property at below market value to make the BRRRR math work.

Target Properties: Where to Find Deals

• Distressed sales: Properties that have been neglected, need repair, or are unmaintained
• Estate sales: When heirs want quick liquidation, prices are often negotiable
• Probate properties: Court-ordered sales with motivated sellers (estates, trusts)
• Foreclosures: Banks often accept 10-15% below fair market value to avoid lengthy processes
• Divorce settlements: Properties sold quickly in family law proceedings
• Wholesaler deals: Wholesalers find below-market properties and assign contracts for a fee
• Off-market listings: Direct outreach to motivated sellers (cold calls, postcards, door knocking)

Deal Analysis: The 70% Rule

The 70% rule is a quick screening tool for BRRRR deals:

Maximum Offer = (ARV × 70%) − Rehab Costs

This 70% target accounts for rehab, carrying costs, closing costs, holding, and gives you a healthy margin. Example:

• ARV (After-Repair Value): $315,000 (based on comps)
• 70% of ARV: $315,000 × 0.70 = $220,500
• Estimated Rehab: $55,000
• Maximum Offer: $220,500 − $55,000 = $165,500

This rule leaves margin for error and ensures the deal pencils out. Conservative investors target 65% instead of 70% for additional safety.

Market Selection for STR BRRRR

Not all markets are suitable for STR BRRRR. Evaluate markets on:

• Demand: Year-round or strong seasonal tourism (ski towns, beach towns, city destinations)
• Regulations: No strict STR bans or licensing restrictions that prevent operation
• Competition: Healthy STR market, not oversaturated with inventory
• Property prices: Sub-$300,000 purchase prices allow for aggressive rehab + strong returns
• Nightly rates: Average Daily Rates (ADRs) of $200+ support healthy cash flow

Top markets for 2026: Denver, Austin, Nashville, Asheville, Scottsdale, Lake Tahoe, Miami, Charleston, New Orleans.

Step 2: REHAB — Renovating for Maximum STR Value

Rehab is where you add value. The goal is to increase ARV and, critically, monthly rental income.

STR-Specific Upgrades That Boost ADR

Not all upgrades are equally valuable. Focus on amenities guests pay premium rates for:

• Hot tub / spa: Increases nightly rate by $50-$100, typical cost $4,000-$6,000
• Outdoor space: Patio, fire pit, outdoor kitchen — adds $30-$50/night, cost $3,000-$8,000
• Game room / entertainment: Pool table, arcade, board games — adds $20-$40/night, cost $1,500-$3,000
• Luxury linens & furnishings: High-quality bedding, furniture, décor — adds $20-$30/night, cost $5,000-$10,000
• Smart home features: Keyless entry, smart thermostats, WiFi — adds $10-$20/night, cost $2,000-$4,000
• Themed rooms / luxury bathrooms: Luxury en-suites, themed bedrooms — adds $30-$60/night, cost $5,000-$15,000
• Kitchen upgrade: Stainless appliances, granite countertops — adds $20-$40/night, cost $5,000-$15,000

The STR rehab rule: Every dollar spent on guest-facing amenities should generate at least 25 cents in additional monthly rent.

Rehab Budget & Timeline

Plan for $30,000-$80,000 in total rehab costs for a typical BRRRR property. Budget breakdown:

• Kitchen & bathrooms: $15,000-$25,000
• Flooring, paint, cosmetics: $8,000-$15,000
• Furnishings & décor: $8,000-$15,000
• Amenities (hot tub, game room, etc.): $4,000-$10,000
• Contingency (15% buffer): $3,000-$8,000

Target timeline: 3-6 months. Many BRRRR investors use contractors and project managers to stay on schedule.

Tax Treatment of Rehab Costs

This is critical from a tax perspective. Capitalize structural improvements; expense cosmetic fixes:

• Capitalize (depreciate): Roof, HVAC, plumbing, electrical, windows, structural repairs, built-in appliances
• Expense: Paint, flooring (if not structural), landscaping improvements, soft goods (furniture, linens, décor)

Cost segregation bonus: Soft goods and furnishings can qualify for 5-7 year MACRS lives plus 100% bonus depreciation, creating immediate deductions. Example: $15,000 in furnishings = $15,000 first-year deduction at 100% bonus depreciation.

Step 3: RENT — Operating as a Short-Term Rental

After rehab, your property is ready to operate as an STR. This is where the cash flow begins.

Why STR Over LTR in BRRRR

Monthly revenue comparison:

• LTR at $2,000/month: Annual gross revenue $24,000
• STR at $210/night, 75% occupancy: $210 × 22.5 nights/month × 12 months = $56,700 annual gross revenue

STRs generate 2.4x the gross revenue. After expenses (which are slightly higher for STRs), net cash flow is still 1.8-2.2x higher. This is why refinancing is more aggressive with STRs and cash-on-cash returns are exceptional.

Setting Up Your STR Listing

Get your property operational quickly:

• Professional photography: $500-$1,000 (critical for ADR)
• High-quality description and house rules
• Airbnb/Vrbo optimized for search (keywords, amenities, pricing)
• Dynamic pricing tool (Beyond, Airbnb Smart Pricing, or manual management)
• Property management software (Hostaway, Properly, Staynt) to track calendar and communications
• Quick 24-48 hour first guest acceptance to build reviews

Material Participation & The STR Loophole

To use the STR loophole (deduct losses against W-2 income), you must meet IRS material participation requirements:

• Worked 100+ hours in the STR activity during the year, OR
• Worked 100+ hours AND no one else worked more than 100 hours, OR
• Work constitutes substantial participation (vary based on profession)

For most investor-owners, hiring a property manager disqualifies you. You must manage bookings, guest communication, maintenance scheduling, or pricing yourself to meet the test. See The STR Loophole: Complete Tax Guide for complete details.

Step 4: REFINANCE — Pulling Your Cash Out

After 12-24 months of STR operation, you refinance to recover your invested capital and deploy it into the next deal.

Cash-Out Refinance Mechanics

You refinance based on the property's new appraised value (not the purchase price). Example:

• Original purchase price: $200,000
• Rehab costs: $50,000
• Total invested: $250,000
• New appraisal: $315,000 (reflecting improvements and STR income)
• Refinance at 75% LTV: $315,000 × 0.75 = $236,250
• Pay off original hard money loan: ~$200,000
• Cash out: $36,250 net (after closing costs)

You recover your rehab costs and closing costs, and the property still has 25% equity cushion. Better yet, you have a long-term mortgage at a lower rate (7-8% vs. 10-14% hard money).

Refinance Loan Options

DSCR Loans (Preferred for STR BRRRR): Non-traditional mortgages based on Debt Service Coverage Ratio. No income verification. Lender evaluates: Annual NOI / Total Annual Debt Service. Most require DSCR of 0.75 or higher (some 0.60). Rates: 7.5-8.5%, terms: 5-30 years, down payment: 20-25%.

Conventional Mortgages: Traditional 30-year fixed mortgages. Require full income documentation, typically require 25% down for investment properties. Rates: 6.5-7.5%. Easier to refinance again later.

Portfolio Loans: Some banks offer portfolio loans held in-house, not sold on the secondary market. More flexible underwriting, accommodate STR profiles better. Rates vary, terms typically 5-10 years adjustable.

Tax Implications of Refinancing

Refinance proceeds are NOT taxable income. The IRS treats them as loans (debt), not revenue. You can pull out $100,000 tax-free. However, there are a few considerations:

• Loan fees and closing costs reduce net cash received
• Interest on refinanced debt is deductible (allocate to the property's mortgage interest deduction)
• Refinancing resets your depreciation basis — you depreciate the new property value, not the original

Step 5: REPEAT — Scaling Your STR Portfolio

This is where BRRRR becomes exponential wealth building. You take the refined capital and acquire the next deal.

Recycling Capital Across Properties

Year 1: Invest $250K → Refinance $232K recovered → Keep $18K equity in deal 1

Year 2: Deploy $232K (from deal 1) + $50K personal funds → Buy deals 2 & 3 → Refinance both → Recover $464K total

Year 3: Deploy $464K from deals 1-2 + $50K personal → Buy deals 4 & 5 → Total portfolio growing exponentially while only deploying personal capital sporadically

Portfolio Growth Trajectory

A realistic 2-3 year growth path:

• Year 1: Own 1 property, net investment $250K, monthly cash flow $1,900
• Year 2: Own 3 properties, net investment $300K cumulative, monthly cash flow $5,700
• Year 3: Own 5 properties, net investment $350K cumulative, monthly cash flow $9,500
• Year 4: Own 8 properties, net investment $400K cumulative, monthly cash flow $15,200

By year 4, you have deployed only $400K of personal capital, yet own 8 properties worth $2.5M+ with $1.2M+ in equity. Monthly cash flow alone pays for living expenses, and you are paying off mortgages with someone else's money (guests).

Entity Structuring for Multiple Properties

As you scale, entity structure matters for liability and tax planning:

• Individual ownership: Simple but high liability. If sued, all properties are exposed.
• Series LLC: Each property in a separate series of an umbrella LLC. Liability confined to one property. Growing in popularity.
• Separate LLCs per property: Each property owns its own LLC. Highest liability protection but more complex accounting and filing.

Work with a real estate attorney to determine the optimal structure for your state and portfolio size.

When to Add Property Management

Self-managing STRs works for 1-2 properties. At 3-4 properties, consider hiring:

• Property manager: Handles guest communication, cleaning coordination, maintenance — typically 8-12% of gross revenue
• Dedicated virtual assistant: Handles bookings, calendar, pricing, basic guest questions — $1,500-$3,000/month

Note: If you hire a property manager, you lose material participation and cannot use the STR loophole for that property. Plan ahead.

BRRRR + STR Loophole: The Tax Advantage

This is the unique CPA angle that makes BRRRR + STR the ultimate wealth-building strategy. Traditional BRRRR investors miss the massive tax savings available through the STR loophole and cost segregation.

How the STR Loophole Makes BRRRR Exponentially Powerful

With traditional LTR BRRRR, depreciation losses are trapped in passive loss limitations. You cannot deduct them against W-2 income; you can only offset passive gains from other rentals, or carry forward indefinitely.

With STR BRRRR + material participation, you can deduct all depreciation losses against your active W-2 income (up to $25,000/year for lower-income taxpayers, or unlimited if you are a real estate professional).

Example (LTR): $50,000 in annual depreciation. Trapped in passive loss bucket. No tax benefit unless you have $50,000 in passive gains. You only get tax benefit 10+ years later at sale.

Example (STR with loophole): $50,000 in annual depreciation. Immediately deductible against your W-2 income. At 37% tax bracket = $18,500 in tax savings THIS YEAR.

That $18,500 in tax savings on a single property compounds across a multi-property portfolio.

Cost Segregation on REHABBED Value

Here is the critical insight: cost segregation applies to the REHABBED building value, not just the purchase price.

Example: Purchase price $200,000, rehab $55,000, total invested $255,000, appraised at $315,000.

The cost segregation study values the improved property at $315,000. Approximately 30-35% of that ($105,000) gets reclassified into shorter-lived property. With bonus depreciation:

• 100% of reclassified amount = $105,000 deduction in Year 1
• Remaining straight-line depreciation on building = $20,000 annually (27.5 year life)
• Total Year 1 depreciation = $125,000

At a 37% tax bracket: $125,000 × 37% = $46,250 in tax savings on a single property in Year 1.

Comparative Tax Scenarios

Assume an investor with $300,000 taxable income (W-2 job) purchases a $315,000 STR property with a 70% LTV DSCR loan.

The difference: $46,250 in tax savings in Year 1 alone on a single property, through the combination of STR operation + cost segregation + material participation.

Related Resources

For deeper technical guidance on the STR loophole requirements and documentation, see The STR Loophole: Complete Tax Guide. For cost segregation mechanics and detailed examples, see Cost Segregation: Accelerate Depreciation and Slash Your Tax Bill.

Financing Your BRRRR Deal

The financing structure is critical to BRRRR success. Most investors use a two-phase approach: hard money to acquire and rehab, then refinance into long-term financing.

Hard Money & Bridge Loans (Purchase & Rehab Phase)

Hard money lenders specialize in short-term, asset-based lending for distressed properties. They don't care about your credit; they care about the property and exit strategy.

Terms:

• Interest rate: 10-14% annually
• Origination points: 2-3 points (fees) of the loan amount upfront
• Loan-to-value: 65-80% of purchase price (or 50-75% of ARV)
• Term: 12-18 months, often extendable
• Exit strategy: Refinance into long-term mortgage or sell

Hard Money Example:

Acquire property for $200,000. Get a hard money loan for $150,000 (75% LTV).

• Loan amount: $150,000
• Points: 3% = $4,500 due at closing
• Interest: 12% annual = $18,000/year = $1,500/month in interest only
• Term: 18 months to rehab and refinance
• Total interest cost: $27,000 (18 months)
• Total cost of money: $31,500 ($4,500 + $27,000)

DSCR Loans (Refinance Phase)

DSCR loans are the refinance weapon for STR BRRRR investors. They don't require income verification; they are based entirely on the property's rental income.

DSCR Calculation:

DSCR = Annual NOI / Total Annual Debt Service

For a property with $22,800 annual NOI and $22,200 annual debt service (principal + interest):

DSCR = $22,800 / $22,200 = 1.03

Lender Requirements:

• Minimum DSCR: 0.75 to 1.0+ (varies by lender)
• Down payment: 20-25%
• Interest rate: 7.5-8.5%
• Loan term: 5-30 years
• Reserve requirements: 6-12 months PITI (principal, interest, taxes, insurance)
• Income verification: NONE (property cash flow only)

DSCR Loan Example:

Property appraised at $315,000 with $22,800 annual NOI. You want a 30-year loan at 7.8%.

• Loan amount: $236,250 (75% LTV)
• Annual debt service: $22,168
• DSCR: $22,800 / $22,168 = 1.03
• Lender approves (DSCR above 1.0)
• Monthly payment: $1,847
• Cash flow: $1,900/month - $1,847 = $53/month cushion (wait 12 months first!)

Wait 12 months of documented STR income before refinancing. Lenders want to see 12 months of Schedule E or STR platform statements showing consistent cash flow.

Conventional Mortgages for Investment Properties

If you have strong income and credit, conventional mortgages work for BRRRR refinancing:

• Interest rate: 6.5-7.5%
• Down payment: 25% (investment property)
• Term: 30 years, fixed rate
• Requirements: Full income documentation, W-2 verification, tax returns
• Advantage: Lower rates, easy to refinance later if rates drop

FHA Loans for Investment Property (House Hacking)

Traditional FHA loans (3.5% down) are for owner-occupied properties only. However, the house hack strategy allows you to use FHA on an investment property:

The House Hack Strategy:

1. Buy a 2-4 unit property with an FHA loan (only need 3.5% down)
2. Live in one unit as owner-occupied primary residence
3. Rent the other units as STRs or traditional rentals
4. FHA allows owner-occupancy "rental assistance" income to help qualify for the loan

Example:

Purchase a 3-bedroom duplex for $250,000. FHA loan for $241,250 (3.5% down). Live in one side, rent the other side for $2,000/month. The rental income counts toward your debt-to-income ratio, making it easier to qualify.

FHA Pros & Cons:

Pros: 3.5% down, easy qualification, allows owner-occupancy blend

Cons: Mortgage insurance required (0.55% annually), must occupy for 1 year, max property value limits, limited to 1-4 unit properties

HELOCs: Funding the Down Payment with Existing Equity

If you already own property with equity — your primary home or an existing rental — a home equity line of credit is often the cheapest source of down-payment and rehab capital for the buy phase. A HELOC on an investment property typically prices at prime + 0.5-2% (roughly 7.25-8.75% APR in 2026) with a 70-80% LTV cap, while a HELOC on your primary residence is cheaper still. Either way you only pay interest on what you draw, and because the funds are traced to a rental acquisition, the interest is deductible on Schedule E under the IRS interest tracing rules. Pay the line back down after the refinance step and it becomes reusable capital for the next deal.

Private Money & Partnerships

Some investors partner with private lenders or passive partners:

• Private lender: You borrow from a wealthy individual at agreed-upon terms (typically 8-12%, no points). More flexible than hard money.
• Partnership: A passive partner puts in capital; you manage the deal. Split profits per partnership agreement (common 50/50 or 70/30).
• Equity JV: Partner contributes capital and equity; you retain management control. Typical return 15-20% to partner.

Real Estate Syndication

Syndication is a passive investment vehicle where a sponsor (syndicator) raises capital from investors to acquire and operate large properties (multifamily, commercial).

How Syndication Works:

1. Syndicator identifies an off-market deal (e.g., 20-unit apartment building)
2. Raises capital from passive investors (accredited or non-accredited depending on structure)
3. Manages the acquisition, operations, and asset management
4. Distributes returns to investors (typically 8-12% annually)
5. Exits via sale or refinance (5-10 year hold)

Syndication Example:

$4M apartment building. Syndicator raises $2M in equity from 40 investors ($50K each). Obtains $2M debt. Operates property, targets $300K annual profit, pays out 10% distributions ($30K per $50K investment = 60% annual return to limited partners). Exits in 5 years with 2x equity return.

Tax Treatment:

• Passive investment — losses cannot offset W-2 income (passive loss limitation)
• K-1 distributions — depreciation pass-through (may produce K-1 losses if property is cost-segregated)
• Non-controlling interest — no material participation

Syndications are passive, which simplifies your life but limits tax benefits. BRRRR is more tax-efficient if you can manage it yourself.

Real Estate Crowdfunding

Crowdfunding platforms democratize real estate investment:

Popular Platforms:

• Fundrise: Targets 8-11% annual returns, $10/share entry, diversified portfolio
• RealtyMogul: 8-12% returns, minimum $5,000 investment, accredited investor option
• CrowdStreet: Commercial real estate, 8-12% returns, accredited investors
• Yieldstreet: Mixed real estate + alternative investments, 8-10% targets

Key Characteristics:

• Passive income: You invest, sponsor manages the property
• Low entry: $500-$10,000 minimums
• Diversification: Easy to spread capital across multiple deals
• Illiquid: Lock-up periods typical (3-7 years)
• Tax reporting: Similar to syndications, K-1 distributions

Crowdfunding is ideal for passive investors wanting real estate exposure without the work of BRRRR.

Sample BRRRR Deal Analysis

Here is a real-world BRRRR deal analysis with complete financials:

Why the Monthly Cash Flow Is Low (and Why That's OK)

The post-refinance monthly cash flow is only $53/month because the property appraised at $315,000, allowing us to pull out nearly all our investment via refinancing. The real wealth creation comes from:

1. $78,750 in retained equity — Building wealth without deploying more capital
2. $82,250 in recovered capital — Recyclable into the next BRRRR deal
3. Mortgage paydown — Tenants paying down your principal (~$5,000/year)
4. Appreciation — If the property appreciates 3%/year, that is $9,450 more equity
5. Tax savings — Depreciation deductions worth $25,000-$50,000 annually (see next section)

Year 2-5 Projections (Same Property)

Assume slight occupancy and rate growth (common in maturing STR markets):

• Year 2: 80% occupancy, $215 ADR → $61,920 gross → $14,570 NOI → $1,214/month cash flow
• Year 3: 82% occupancy, $225 ADR → $66,330 gross → $18,980 NOI → $1,582/month cash flow
• Year 4: 85% occupancy, $235 ADR → $71,475 gross → $24,125 NOI → $2,010/month cash flow
• Year 5: 85% occupancy, $245 ADR → $74,385 gross → $27,035 NOI → $2,253/month cash flow

By Year 5, the property is generating $2,253/month in cash flow (plus $15,000+ in principal paydown, plus $30,000 in tax deductions). Total annual benefit to owner: ~$45,000+.

Tax Scenario for This Property (Year 1)

Assuming cost segregation and bonus depreciation:

Total Year 1 Return on $250K Invested:

• Cash recovered (refinance): $82,250
• Cash flow (12 months): ~$10,000
• Tax savings: $42,458
• Principal paydown: ~$2,500
• Total benefit: $147,208
• Return on $250K net invested: 58.9%

This assumes you achieved material participation (100+ hours managing the STR) and used cost segregation. Conservative investors targeting 25-35% annual returns find this very achievable.

Short-Term Rental Insurance

STR insurance is non-negotiable. Standard homeowners insurance explicitly excludes business use and will deny claims if they discover your property is being rented nightly.

Why Standard Homeowners Insurance Doesn't Work

Homeowners policies are written for primary residences or long-term rentals where tenants sign 1-year leases. STRs involve:

• Transient occupants (strangers staying 1-7 days)
• Increased liability (more guests = higher risk)
• Business use (Airbnb violates "non-commercial" clause)
• Loss of rents (if property becomes uninhabitable, business income stops)

STR-Specific Insurance Policies

Specialized carriers now offer STR-specific coverage:

Proper Insurance

• Built for Airbnb/Vrbo hosts
• Coverage: $300K liability, property damage, loss of income
• Cost: $120-$200/month ($1,440-$2,400/year)
• Availability: Most U.S. states, straightforward underwriting

CBIZ RiskAssure

• Comprehensive STR coverage
• Coverage: $1M liability, property damage, host protection
• Cost: $1,500-$3,000/year depending on location and value
• Good for multi-property portfolios

Safely

• Technology-focused STR insurance
• Coverage: $1M+ liability, property damage, income protection
• Cost: $1,500-$2,500/year
• Growing provider, good reviews

Oasis Insurance

• Dedicated vacation rental insurance
• Coverage: $300K-$1M liability depending on plan
• Cost: $900-$2,500/year
• Available nationwide

What to Look for in STR Insurance

• Liability coverage: Minimum $1M (higher is better for multi-property owner)
• Property damage: Covers guest-caused damage to your furnishings, appliances, structure
• Loss of income: If property is damaged and uninhabitable, coverage pays lost rental income
• Host protection: Covers legal liability if a guest is injured
• No exclusions for "business use": Explicitly states STR/Airbnb/Vrbo use is covered
• Replacement cost (not cash value): Furnishings replaced at full cost, not depreciated

Airbnb's AirCover Limitations

Airbnb includes $1M host protection liability on all bookings at no cost. However, there are significant limitations:

• Only covers Airbnb bookings (not Vrbo, direct bookings, or future platforms)
• $1M applies to bodily injury only (not property damage or loss of rents)
• Excludes certain scenarios: gross negligence, illegal activity, intentional misconduct
• May not cover all claim types (gap in coverage with third-party liability)

Airbnb's coverage is a backup, not a replacement. Professional STR operators get dedicated policies.

Insurance as a Tax Deduction

100% of STR insurance premiums are deductible as a rental property expense. For a $2,000/year policy, that is a $2,000 deduction, worth $740 at a 37% tax rate.

Estimated Annual Insurance Cost by Property Value

Common BRRRR Mistakes to Avoid