DSCR Loans for Airbnb & Short-Term Rentals

DSCR Loans for Airbnb & Short-Term Rentals

Short-term rentals on platforms like Airbnb and VRBO can generate more income than a long-term lease in the right market. But financing them requires a program that accepts STR income.

Here's everything you need to know about using DSCR loans for short-term rental properties.

Can You Get a DSCR Loan for an Airbnb?

TL;DR: Often, yes, on programs that accept short-term rental income.

Not all DSCR programs accept short-term rental income, so the program matters before you go under contract.

How programs approach STR:

1. STR programs - Accept short-term rental income, from booking history or a market data report such as AirDNA
2. Hybrid programs - Use the lesser of the STR figure or long-term market rent
3. Long-term only - Only accept long-term rental income

Make sure your loan is headed to a program that accepts STR income before going under contract. Use our DSCR calculator to estimate your ratio before making an offer.

How STR Income is Calculated for DSCR

TL;DR: Each program sets its own method. Many start from booking history or a market projection, apply an adjustment the program sets, and convert the result to a monthly figure.

Unlike long-term rentals where rent is straightforward, STR income calculation is more complex:

Method 1: Third-Party Data (AirDNA, Rabbu)

Programs that accept projections commonly:

1. Pull market data for comparable properties
2. Calculate an annual revenue projection
3. Apply an adjustment (a percentage the program sets) to allow for seasonality and expenses
4. Divide by 12 for monthly income

Method 2: Actual Operating History

If you're refinancing an existing STR:

• Provide the booking history the program asks for
• The program may average the actual income over that period
• Documentation can include platform statements and other records the program requires

Method 3: Hybrid Approach

Some programs use the lesser of:

• The adjusted STR figure
• Long-term market rent

This protects the investor if STR rules change.

STR DSCR Calculation Example

Property Details (hypothetical):

• Beach condo purchase: $450,000
• Down payment: the program's requirement for short-term rentals
• Interest rate: your quoted rate

STR Income:

• Start with the market projection or booking history
• Apply the program's adjustment
• Divide by 12 for the usable monthly income

PITIA:

• P&I: from your quote on the loan amount
• Taxes: the annual bill divided by 12
• Insurance: the annual STR policy premium divided by 12
• HOA: the monthly dues
• Total PITIA: the sum of the four

If that total comes to roughly 93% of the usable STR income, DSCR = Income / PITIA ≈ 1.08.

At 1.08, the usable STR income covers the payment with little room to spare. Whether that clears a given program depends on the minimum that investor sets for short-term rentals.

STR-Specific Requirements

TL;DR: Expect higher insurance costs, verify local regulations permit STR, and budget for larger reserves.

Higher Insurance Costs

STR properties need specialized insurance:

• A standard landlord policy may not cover STR use
• Short-term rental coverage often costs more than a long-term landlord policy
• Some programs require proof of STR-specific coverage
• Factor this into your DSCR calculation

HOA and Local Regulations

Before buying, verify:

1. HOA allows short-term rentals - Many don't
2. Local regulations permit STR - Check city/county rules
3. Licensing requirements - Some areas require permits
4. Occupancy taxes - Factor into your projections

Lenders may ask for documentation confirming STR is permitted.

Higher Reserve Requirements

Some programs require additional reserves for STR:

• The program sets the months of PITIA required
• STR files may need more than a long-term rental
• Reasoning: Income is less predictable

Advantages of STR + DSCR Financing

TL;DR: In the right market, STR income can exceed long-term rent, which can improve the DSCR on programs that count it.

Higher Income = Better DSCR

Where STR income exceeds long-term rent and the program counts it, this can:

• Qualify properties that wouldn't work as long-term rentals
• Open more favorable terms on some programs (due to a better DSCR)
• Allow you to buy in higher-priced markets

No Income Documentation

Like all DSCR loans, STR DSCR loans don't require:

• Tax returns
• W-2s or pay stubs
• Employment verification

Property Can Close Vacant

On programs that accept projections, you may not need an existing booking history:

• Third-party data projects future income
• Can close and immediately list on Airbnb
• No need to wait for long-term tenant

Challenges with STR DSCR Loans

Fewer Lenders Offer Them

Not every DSCR program accepts STR income. You may need to:

• Compare more programs to find one that does
• Accept slightly different terms
• Work with a loan officer who can place investor loans with several programs

Higher Rates Sometimes

Some programs price STR files differently:

• A pricing adjustment on the rate
• Additional points at closing
• Reasoning: Perceived higher risk

Regulatory Risk

Lenders worry about STR regulations:

• Cities increasingly restrict short-term rentals
• Property might need to convert to long-term
• Some programs mitigate by using long-term rent as a backup calculation

Best Property Types for STR DSCR Loans

Beach and Vacation Destinations

• Consistent demand from tourists
• High nightly rates
• Predictable seasonal patterns

Urban Centers

• Business travelers
• Event attendees
• Year-round demand

Near Attractions

• Theme parks
• National parks
• Ski resorts
• Sports venues

Unique Properties

• Cabins and A-frames
• Treehouses
• Properties with amazing views
• Homes with pools or hot tubs

Tips for STR DSCR Loan Approval

1. Research Before You Buy

• Pull AirDNA data for the area
• Verify STR is legally permitted
• Check comparable property performance
• Calculate DSCR using conservative estimates

2. Choose the Right Lender

• Ask specifically about STR income acceptance
• Understand the program's calculation method
• Compare terms between programs that accept STR income

3. Prepare for Higher Costs

• Budget for STR insurance
• Factor in platform fees
• Account for higher turnover costs
• Include furnishing in your budget

4. Document Everything

If refinancing an existing STR:

• Keep detailed booking records
• Download platform income reports
• Maintain separate accounts for STR income

STR vs. Long-Term Rental: DSCR Comparison

Same Property, Different Strategy:

Factor	Long-Term Rental	Short-Term Rental
Qualifying income	The lease or market rent	The program's adjusted STR figure
Insurance	Landlord policy	STR policy, often higher
PITIA	Your quoted P&I + taxes + insurance	Same, with the STR insurance
DSCR	Rent / PITIA	Adjusted STR income / PITIA
Program availability	Broad	Programs that accept STR income
Management intensity	Lower	Higher

In a strong STR market, the STR version can show a stronger DSCR, but it requires more active management and depends on the program counting that income.

Scaling Your STR Portfolio with DSCR

DSCR loans are ideal for building a portfolio of short-term rentals:

• Each property qualifies on its own income
• Not bound by the conventional financed-property cap
• No DTI calculation
• Can mix STR and long-term rentals

Hybrid Strategy: STR with Long-Term Backup

Smart investors plan for flexibility:

1. Buy properties that work as both STR and long-term
2. Qualify using long-term rent for more program options
3. Operate as STR for higher income
4. Convert if needed if regulations change

This approach gives you the best of both worlds: more financing options and higher income potential.

Ready to Finance Your Airbnb Investment?

See if you qualify for an STR-friendly DSCR loan. Our quick assessment will help you understand your options.

Check Your Eligibility Now

---

Zac Cook is a licensed mortgage loan originator (NMLS #2111496). This content is for informational purposes only and does not constitute financial advice. Loan approval is subject to credit and property qualification. Equal Housing Lender.