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ResourcesseparatorFinancing for Real Estate Investment

Airbnb Financing: 9 Ways to Fund Your Property Investment

Key takeaways

Airbnb Financing: 9 Ways to Fund Your Property Investment

How you finance the launch of your Airbnb business will have a major impact on its sustainability and profitability. Thus, investors should choose carefully from available Airbnb loans to find the best terms and conditions for their specific property and financial situation.

In this article, we will discuss what an Airbnb loan is, what it can be used for, what the best short-term rental loan types are, and which lenders are best for vacation rental owners.

The top 9 Airbnb loan types are:

  • Conventional Home Loan: Best for Airbnb Hosts with Solid Credit History
  • Debt-Service Coverage Ratio (DSCR) Loan: Best for Airbnb Renovations and Furniture
  • Cash-Out Refinance: Best for Buying a Second Home to Rent Out on Airbnb
  • Home Equity Loan: Best for a Down Payment on an Airbnb
  • Home Equity Line of Credit (HELOC): Best for Airbnb Hosts with Significant Equity
  • Hard Money Loan: Best for Cheap Non-Traditional Airbnb Property Types
  • Owner Occupied Investment Property Loan: Best for Airbnb Investors Who Don’t Own a Home
  • Business Loan: Best for Airbnb Arbitrage

The 6 best Airbnb lenders are:

What an Airbnb Loan Is

An Airbnb loan is a type of financing that is taken to be used for the purpose of starting, running, or expanding a short-term rental property business. There isn’t a single universal type of Airbnb loan. Airbnb loans can come in different types, from different lenders, at different costs, and with different requirements and terms. Based on the legal setup, investors can apply for personal loans or business loans to cover the needs of their short-term rental.

An Airbnb loan, also commonly referred to as a short-term rental loan, can be used for various purposes, depending on the requirements and the financial status of the borrower, who is usually a real estate investor or an Airbnb host. The most common uses include buying a vacation rental, taking out equity on a short-term rental, renovating or furnishing an Airbnb property, and even covering the recurring expenses of a rental business.

Why Investors Seek Airbnb Loans

Real estate investors seek to get an Airbnb loan for a number of different reasons. The most common uses of this type of lending include:

  • Buying a new property: In most cases, investors seek Airbnb loans in order to purchase an investment property to rent on a short-term basis. With a median home price close to $330,000 at the moment (as reported by Zillow), buying an Airbnb property requires a large amount of capital. The best types of Airbnb loans for buying a new property are conventional mortgages, cash-out refinancing, home equity loans, HELOCs, and owner occupied investment property loans.
  • Taking out equity: Similar to a home equity loan or a HELOC, another type of Airbnb loan can be used to borrow money based on the equity you have in your vacation rental. The best types of Airbnb loans for taking out equity are cash-out refinancing, home equity loans, and HELOCs.
  • Renovating: An Airbnb business loan can be taken to renovate and upgrade an investment property you’ve just purchased (before you list it on Airbnb) or a property you’ve been listing for a while (that’s suffered significant wear and tear). The average cost of renovating a home starts at $15,000 and can exceed $200,000, depending on the size and current state of the property and the renovation plan. The best types of Airbnb loans for renovating are debt-service coverage ratio loans and home equity loans.
  • Furnishing: If you’re just getting started in Airbnb, you can borrow money to furnish your investment property. The average cost of furnishing an Airbnb on a medium budget is $20,000-$50,000. Otherwise, it ranges from $1,000 (on a low budget) to $100,000 for luxury rentals. The best types of Airbnb loans for furnishing are debt-service coverage ratio (DSCR) loans and home equity loans.
  • Starting Airbnb arbitrage: If you want to make money from Airbnb but do not own a property, you can rent a long-term rental and sublet it on a short-term basis to pocket the difference in revenue. The startup costs are related to furnishing the property, providing linen and supplies, obtaining short-term rental licenses and permits, and marketing. The best types of Airbnb loans for starting Airbnb arbitrage are business loans.
  • Covering operating costs: Less frequently, investors take an Airbnb loan to pay for the ongoing costs related to operating a short-term rental property. However, this is a poor business model as it means that the rental does not generate enough revenue to cover the operating expenses, so the Airbnb host is ending up losing money rather than making money. The best types of Airbnb loans for covering operating costs are HELOCs.

The 8 types of Airbnb loans are:

1. Conventional Home Loan for Airbnb

The most popular type of Airbnb loan is the conventional mortgage loan. This is a long-term mortgage loan which is usually borrowed from a bank and is not part of a specific government program (like FHA loans, VA loans, and USDA loans) but might still be backed up by Freddie Mac or Fannie Mae. Taking a conventional mortgage for an investment property is similar to borrowing to buy a home but faces stricter requirements. There are two main types of conventional home loans: fixed-rate mortgages (FRM) and adjustable-rate mortgages (ARM).

  • Best for: Buying an Airbnb property, especially if you are in a good financial standing and are not already paying off a mortgage on your primary home. If this is a second mortgage that you will be taking, requirements are stricter.
  • Cost: Typically lenders require a minimum down payment of 20% of the price of an investment property (Airbnb or not) though putting more money down can bring you preferable lending terms. Closing costs average 2%-6% of the loan amount. Monthly mortgage payments are subject to relatively standard mortgage rates, around 5%-6% at the moment. However, the interest rate depends on the prevailing nationwide rates, the lender, and the length and terms of the loan.
  • Requirements: In most cases, a minimum credit score of 620 is required in addition to the 20%+ down payment. Most lenders ask for 6 months of cash reserves as well to ensure the smooth running of the Airbnb rental business.
  • Terms: The terms of conventional mortgage loans for Airbnbs can vary widely. The typical loan lengths are 15 and 30 years, but other lengths can also be negotiated. Interest rates can be fixed (meaning that the investor pays the same interest for the duration of the mortgage) or adjustable (meaning that after a certain period, the lender has the right to adjust the mortgage rate based on current rates).
  • Use Cases: Conventional mortgages are usually used to buy an investment property, but investors can borrow an additional amount to finance closing costs, renovations, and furnishing a vacation rental.
  • Pros and Cons: One of the main benefits of a conventional mortgage loan is that it gives Airbnb investors a lot of flexibility to negotiate the best terms with regards to duration, amount, type, interest rates, etc. Also, monthly payments can be relatively small. Moreover, most conventional Airbnb loans are backed up by Freddie Mac or Fannie Mae. On the flip side, you need to be able to provide a sizeable down payment and have a solid credit score and history. You have to be willing to commit to repairing the loan in the long term.

Conventional mortgages provide investors with a feasible financing option to launch an Airbnb business. They are one of the safest and most predictable Airbnb loans.

2. Debt-Service Coverage Ratio (DSCR) Loan for Airbnb

A debt-service coverage ratio (DSCR) loan can be used by investors to renovate or furnish an Airbnb property. This long-term loan might also work as a mortgage and go towards purchasing an investment property though the requirements are strict. Qualifying for a DSCR loan is based on the ratio between your property’s net operating income (NOI) and the debt you’d want to take.

  • Best for: Renovating and furnishing an operating Airbnb property.
  • Cost: To use a DSCR loan for buying a short-term rental, most lenders require a downpayment of 20%-25% of the property price. The interest rate is usually 1%-2% higher than conventional mortgage rates. Closing costs are comparable to those of conventional mortgages, so anything between 2% and 6% of the loan amount.
  • Requirements: The main qualification requirement for DSCR loans to be used for investment properties (including Airbnb rentals) is a minimum DSCR of 1.25. This means that the rental is generating at least $1.00 in net income (after operating expenses, taxes, and depreciation) for every $1.25 of annual loan amount. Most lenders expect a minimum credit score of 640.
  • Terms: The terms vary between lenders. Most DSCR loans cover 15 to 20 years, but they can also range from 5 to 25 years. Interest can be fixed or adjustable, and the typical rate is 1%-2% higher than for a conventional mortgage.
  • Use Cases: DSCR loans are usually used to renovate or furnish an Airbnb. They might also work as a mortgage for buying a vacation rental property.
  • Pros and Cons: DSCR loans might be easier to qualify for than other Airbnb loan types and do not have a minimum personal income requirement. They allow investors to borrow against the rental income of their investment property even if they are just getting started, as long as they can provide a reliable estimate of the expected rental income. However, similar to conventional mortgages, a DSCR loan needs a strong credit score and a solid down payment.

Although DSCR loans are less popular than other types of Airbnb loans, they offer investors a good opportunity to renovate and furnish their rental. They are particularly good for Airbnb hosts who don’t have another solid source of income.

4. Cash-Out Refinance for Airbnb

Cash-out refinancing is a type of long-term Airbnb loan which gives investors access to cash by allowing them to tap into the equity they have in their primary home (or another investment property). This financing method replaces an existing home mortgage with a bigger mortgage, so that the difference can be used in cash.

  • Best for: Buying a second home to rent out on Airbnb.
  • Cost: Cash-out refinance loans come with higher interest rates than conventional mortgages because of the more risk involved, usually 0.125%-0.25% higher. Closing costs are comparable at 2%-6% of the new loan amount.
  • Requirements: Investors can usually use up to 80% of their home equity, so the loan amount depends on their equity. Lenders ask for a minimum credit score of 620 in most cases.
  • Terms: The typical repayment period for cash-out refinancing is 15-30 years. Interest rates can be fixed or adjustable and usually exceed those for conventional mortgages.
  • Use Cases: Cash-out refinancing can be used to buy an investment property to run as a short-term rental business if investors already have enough equity in their primary home or another property. Investors can also borrow against their primary home or Airbnb rental for renovating and furnishing purposes.
  • Pros and Cons: Cash-out refinance Airbnb loans allow investors to use real estate equity to buy or renovate/furnish a vacation rental property, without having to borrow based on their income sources. Loan durations are long, so monthly repayments are low. On the negative side, borrowing in this way is a bit more expensive as interest rates are higher than with conventional mortgage loans. Also, investors put their primary home at risk.

Cash-out refinancing can be an ideal option for homeowners with significant equity in their primary home who’d like to buy an Airbnb property. It could also work for Airbnb hosts who want to borrow against their equity in their investment property to renovate it or furnish it to boost rental income.

5. Home Equity Loan for Airbnb

Home equity loans allow Airbnb investors to tap into their equity in their primary home (or another rental property) and borrow a lump sum of cash. This is also known as a second mortgage and is a long-term loan. Before opting for this type of Airbnb loan, investors need to keep in mind that it is secured by their primary home (which is put at risk) and that it takes a second place after their first mortgage. This means the mortgage repayment will be given priority over home equity loan repayment should a host default.

  • Best for: Covering the down payment for an Airbnb property as it is provided in the form of a lump sum.
  • Cost: Interest rates on home equity loans are significantly higher than conventional mortgage rates due to the additional risk that lenders take as mortgage repayments are prioritized over home equity loan repayments. The typical increase is about two percentage points. At the moment, the average interest rate for this Airbnb loan is around 7.8%.
  • Requirements: Airbnb hosts can borrow up to 85% of the difference between their home value and the balance on their mortgage. Borrowers are also expected to have a credit score of 620+.
  • Terms: Home equity loans usually need to be repaid in 5-30 years, so Airbnb hosts enjoy some flexibility. Interest rates are higher than for other best Airbnb loans but are always fixed. This means that investors know exactly how much they will pay until the end of the loan duration. It’s best to use a home equity loan when interest rates are relatively low.
  • Use Cases: Real estate investors can use this type of Airbnb loans for a down payment when buying a short-term rental. It can also work for vacation rental renovations and furnishing.
  • Pros and Cons: The main benefit of home equity loans is that they allow investors to finance the down payment of their investment property, and this is something that not many other Airbnb loans allow. Moreover, investors can borrow against real estate equity without having to rely on a verifiable source of income. Interest rates are fixed, so there will be no increases. However, this loan type is more expensive than others due to higher interest rates. Also, there’s a strict limit on how much investors can borrow depending on the value of their primary home and their equity.

Home equity loans are a good option for Airbnb investors who need cash to put down when buying a vacation rental home and who already own a primary home (or another investment property).

6. Home Equity Line of Credit for Airbnb

A home equity line of credit (HELOC) is another long-term Airbnb loan type available to investors who already own a home or another income property and have significant equity in it. Unlike home equity loans, HELOCs give Airbnb hosts access to cash over a draw period, which is usually around 10 years. After the end of the draw period, the repayment period starts when investors can no longer borrow and have to repay the amount they’ve borrowed. This usually lasts 15-20 years. Borrowing against a line of credit can be used to buy an Airbnb property (down payment or monthly mortgage payments), renovating, furnishing, or covering operating expenses.

  • Best for: Buying an Airbnb property when you already have significant equity in your primary home or another income property.
  • Cost: HELOCs come with higher interest rates than conventional mortgages because of the increased risk. However, interest is paid only on the amount that an investor ends up borrowing during the draw period, not on the entire amount that’s made available for borrowing. HELOC Airbnb loans also have annual costs like transaction fees, maintenance fees, membership fees, etc.
  • Requirements: Most HELOC lenders require an equity of 15%-20% or more. They typically lend up to 80% of the home value. A debt-to-income ratio of less than 50% might also be a requirement. Airbnb hosts need a credit score of 620+ to qualify for HELOC.
  • Terms: Airbnb investors can withdraw money over 10-15 years (draw period) and have to repay it over 15-20 years (repayment period). HELOC interest rates are higher than conventional Airbnb loan interest rates because of the more risk. The interest rate is always adjustable, so investors need to be prepared to make higher repayments than expected.
  • Use Cases: Airbnb investors can use a home equity line of credit to purchase a vacation rental including the down payment or monthly payments. They can also use the Airbnb loan to renovate or furnish a short-term rental or even cover the operating costs.
  • Pros and Cons: The main advantage of this Airbnb loan type is that investors can use equity in an existing home to buy a new property or implement major renovation works on it. They don’t have to rely on the rental income as with DSCR loans, for example. Importantly, interest is paid only on the borrowed amount, not the entire available amount. Nevertheless, HELOCs are risky as Airbnb hosts borrow against their primary home. Moreover, interest is adjustable, so repayment amounts might become substantial.

HELOCs are a feasible choice for homeowners or investors with a portfolio of rental properties who’d like to buy or renovate an Airbnb property. The key is to be certain that they will be able to repay the Airbnb loan; otherwise, they risk losing their home.

7. Hard Money Loan for Airbnb

Hard money loans are short-term loans that investors can use when they don’t qualify for more traditional Airbnb loans. For instance, investors with poor credit history or investors interested in non-conventional property types can borrow from hard money lenders. These loans are generally characterized by large down payment requirements and high interest rates, but they offer a lot of flexibility to investors. Hard money loans are called non-conformity loans and are provided by individual lenders or less formal lending institutions than banks.

  • Best for: Non-traditional Airbnb property types.
  • Cost: Many hard money lenders require a down payment of 30%+ of the property price, but investors could be able to find both higher and lower requirements. The typical interest rate ranges between 8% and 15%, so these are some of the most expensive Airbnb loans. Closing costs for hard money loans are usually 2%-5% of the loan amount.
  • Requirements: The qualification requirements imposed by hard money lenders are relatively loose. These loans are based on assets, so as long as the Airbnb property value can cover the size of the loan, an investor can qualify. There are no requirements for credit score or income level.
  • Terms: In most cases, hard money loans have to be repaid within one to three years though Airbnb hosts might be able to negotiate a different duration with the lender. Interest rates are much higher than for conventional mortgages, around 8%-15%. Because of the higher interest and the shorter repayment time, investors need to be ready to make substantial monthly payments.
  • Use Cases: Airbnb investors usually take hard money loans to buy a property, but they need to expect a sizable new source of income in the coming years or high profits from their short-term rental to be able to pay back on time. This type of Airbnb loan can also be used for renovating and furnishing a vacation rental property.
  • Pros and Cons: The main pro of hard money loans is that they serve investors who might not qualify for other types of Airbnb loans due to poor credit history or insufficient verifiable income. Moreover, borrowers do not need to commit for the long term and can be done with repaying quickly. Hard money lenders usually take just a couple of days to approve a loan, while other types of financing institutions might require more than a month. On the flip side though, hard money loans are very expensive, risky, and stressful. There is no backup, so investors can easily lose their Airbnb rental property.

Hard money loans can be a good option for investors who need some extra money to complete the purchase of an Airbnb property, but they are not ideal for investors with no initial capital. They can also work for non-traditional property types like a treehouse, let’s say, as these are relatively cheap and would not qualify for a conventional mortgage.

8. Owner Occupied Investment Property Loan for Airbnb

Airbnb investors can use an owner occupied investment property loan to start a short-term rental business if they buy a small multifamily property, live in one unit, and rent out the rest. This real estate strategy is known as house hacking and can be an affordable way to get into Airbnb investing. The qualification requirements and costs are much lighter, but investors need to plan to live on the property in order for this Airbnb loan to work.

  • Best for: Airbnb investors who don’t own a primary home yet.
  • Cost: The down payment for an owner occupied investment property loan can start at as low as 3%. If you qualify for an FHA loan, the minimum is 3.5%, while a VA loan (if you qualify) requires zero down payment. The interest rate on owner occupied investment property loans are a bit lower than conventional mortgage rates because of the lower risk (homeowners are more likely to do everything possible to repay their mortgage than investors). The closing costs are at around 2%-5% of the loan amount. However, if the down payment is below 20%, borrowers need to pay private mortgage insurance (PMI), which is equivalent to 0.5%-2% of the loan balance per year. This is until their equity becomes 20% of the Airbnb property value. Loan terms can reach up to 30 years.
  • Requirements: To qualify, the Airbnb property has to be a primary home and not just an investment property. Airbnb hosts need to live on the property at least 70% of the time each year and work within 50 miles from the home. They also have to be ready to move to the property within 30 to 60 days of closing and live there for a minimum of year. A credit score of 620 is usually required.
  • Terms: The duration of owner occupied investment property loans used for Airbnb properties can vary, reaching up to 30 years. The interest rate can be fixed or adjustable. The terms of this Airbnb loan type is very similar to the conventional mortgage.
  • Use Cases: Airbnb hosts can use this loan to purchase an investment property, but they have to live in it for at least a year. This is a good option for new investors who are just beginning and have to choose between buying a home and buying an Airbnb. With this loan type, they can buy both.
  • Pros and Cons: Owner occupied investment property loans are much more affordable and attainable than other Airbnb loans. Moreover, they provide access to both homeownership and real estate investing simultaneously. However, they are not feasible with a remote investment strategy or for investors who already own a primary home.

Owner occupied investment property loans are ideal for those who plan to invest in their current market and do not own a home yet. They are perfect for the house hacking strategy which is how many successful real estate investors first got started.

9. Business Loan for Airbnb

Since buying and managing an Airbnb property is considered starting a business, investors have access to business loans too. They are provided by banks and other lending institutions and aim at providing business owners with capital to launch or expand a business enterprise. An Airbnb host can use a business loan to buy a short-term rental or to renovate it or furnish it. It can even be used for Airbnb arbitrage. A particularly good Airbnb loan type is the Small Business Administration (SBA) 504 loan, also referred to as a commercial real estate loan.

  • Best for: Airbnb arbitrage.
  • Cost: The minimum down payment required by different business loan providers varies widely, but Airbnb hosts should be ready to pay 10%-30% in general. Interest rates can also be very different. The SBA loan range is 10%-12.5%, but other financing institutions might ask for significantly more.
  • Requirements: Most business loan requirements include a minimum personal credit score, a minimum business credit score, a certain annual revenue, a certain number of years in business, and a solid business plan.
  • Terms: Business loans can have different durations when used for a vacation rental business. An SBA loan, for example, can last up to 25 years. The interest rates are usually higher than conventional mortgage rates, at 10%-12% or more.
  • Use Cases: Airbnb hosts can use a business loan to buy an investment property or to upgrade their existing short-term rental business. They can also use the loan to start short-term rental arbitrage if they need funds for furnishing the property and marketing it.
  • Pros and Cons: Business loans are a good option for Airbnb investors who think like businesspeople and are able to put together a solid business plan. However, they require more business planning and reporting than other types of Airbnb loans.

Business loans can serve the needs of Airbnb hosts who have previous experience in borrowing money for business purposes. They can offer them access to financing that real estate loans might not.

6 Best Airbnb Lenders

Some of the best providers of Airbnb loans include:


Beeline, an online lender based in Rhode Island, offers a streamlined loan application process for Airbnb hosts and real estate investors in 26 states, including Alabama, California, Florida, Georgia, North Carolina, and Texas. Established in 2019, Beeline aims to simplify the lending process and expedite financing for borrowers.

Airbnb investors can choose from conventional mortgages, refinancing options, or a unique debt-service coverage ratio (DSCR) loan. DSCR financing takes into consideration the investment property's income to determine eligibility, making it an ideal choice for investors who face income-based qualification challenges. However, due to the higher risk associated with DSCR loans, rates are typically 0.75% - 1.25% higher compared to conventional financing options.

Beeline's online application allows borrowers to connect their bank accounts and tax statements for a more accurate pre-approval process, typically completed in just 15 minutes. Each borrower is assigned a dedicated loan specialist for personalized assistance.

Tidal Loans

Tidal Loans offers specific Airbnb financing options for short-term rental property investors. They provide nationwide coverage, except AL, AZ, CA, ID, MN, ND, NV, OR, SD, UT, and VT. The Airbnb loan amount varies from $75,000-$2,000,000 for properties with 1-4 units and up to $5,000,000 for multifamily properties with 5+ units. Interest rates can be fixed or adjustable and start at 3.5%. Loans can be used for buying or refinancing. However, only LLCs, corporations, and LPs qualify.

Intrust Funding

Intrust Funding provides Airbnb business loans in the form of hard money loans. This lender covers Washington State and requires that properties are non-owner occupied; in other words, it finances entirely short-term investments. Most loans last between 5 and 12 months, but there’s some flexibility. The loan amount can reach up to 90% of the after-repair value (ARV) and can be used for both buying a property and renovations/rehabilitation.


theLender has a special short-term rental financing option providing between $100,000 and $3,500,000 in coverage. There are both fixed and adjustable interest rate options, with interest rates ranging from 7.125% to 9.75%. Both individuals and LLCs, corporations, and trusts can qualify.

Modern Lending

Modern Lending offers specialized Airbnb loans to first-time and serial investors. The minimum down payment size is 15% for a first Airbnb property and 20% for consecutive properties. Modern Lending finances up to 10 rentals per host. Other requirements include a debt-to-income ratio below 50%, credit score above 680, and 6-12 months of cash reserves in the bank after the down payment.

Socotra Capital

Socotra Capital provides loans for purchasing Airbnb vacation rental properties, especially along the Pacific and Atlantic coasts and other top locations for Airbnb. Their Airbnb hard money loans aim to help solve the challenges that conventional lenders place ahead of real estate investors. Socotra Capital does not provide much information on requirements and terms, so investors need to contact them online.

Pros and Cons of Airbnb Financing

Taking out an Airbnb loan to buy an investment property or upgrade and furnish it comes with major advantages and disadvantages. The most important ones include:

Airbnb Financing Pros

The main benefits of using an Airbnb loan are:

  • Access to Airbnb investing: Few beginner investors are able to buy a rental property without borrowing or they would need to save up for decades while missing out on opportunities to scale up their investment portfolio. Airbnb loans allow common people to get into real estate investing and start making money from short-term rentals.
  • Ability to scale up business: Sometimes investors use up all their money to buy a property with no capital left to renovate it, upgrade it, furnish it, and optimize it for listing on Airbnb. Short-term rental loans allow Airbnb hosts to improve their business.
  • Snowball effect: Using rental income and equity from an existing Airbnb property, investors can easily qualify for additional financing to buy a new investment property. The more rentals they own, the easier it becomes to expand their rental portfolio.
  • Leveraging others’ money to make money: The combined effect of borrowing money from financial institutions and generating rental income from Airbnb guests to pay off an Airbnb loan is that investors buy an investment property and make money with other people’s money. There’s no free lunch in real estate, but that’s as close as you can get to it.

Airbnb Financing Cons

The main drawbacks of Airbnb loans are:

  • Increased property cost: With a loan, in the long term Airbnb hosts end up paying more than what they would have paid were they able to buy the property in cash. However, some Airbnb loans offer very favorable terms, so mortgage rates get close to inflation rates, and investors don’t lose much money.
  • High risk: Usually to borrow money, investors have to use their Airbnb property or their primary residence as collateral. This is associated with a risk of losing their home or investment in case they are not able to cover the monthly loan payments on time and in full. Thus, Airbnb hosts need to plan carefully before borrowing money.


Financing an Airbnb rental is as important for the success of your real estate investing business as finding the right property to buy. This will affect your recurring expenses, cash flow, and eventually return on investment. As Airbnb loans come with different pros and cons, it’s key to choose the best option for your investment property and for you as an Airbnb host.

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