Short-Term Rental DSCR Loans

Finance Airbnb and vacation rental properties using projected or actual rental income — without relying on personal income.

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STR vs LTR DSCR: Understanding the Difference

Short-term rental (STR) DSCR loans are specifically designed for Airbnb, VRBO, and vacation rental properties. While they share similarities with traditional long-term rental (LTR) DSCR loans, there are important differences:

Long-Term Rentals (LTR):

  • Lease-based income with signed agreements
  • Stable monthly rental income
  • Predictable cash flow
  • Simpler income verification
  • Standard DSCR underwriting

Short-Term Rentals (STR):

  • Nightly/seasonal income model
  • Market-dependent revenue
  • Variable occupancy rates
  • Requires STR-specific documentation
  • Often requires higher down payment
  • Platform history or projections needed

How STR Income Is Evaluated

Underwriting short-term rental income is more complex than traditional rental properties. Lenders evaluate STR income using:

Historical STR Income

  • 12-month operating history (if property is currently operating)
  • Platform statements from Airbnb, VRBO, or Booking.com
  • Verified booking history and occupancy rates
  • Seasonal revenue patterns

Market Rent Analysis for STR Properties

For properties without operating history:

  • AirDNA or similar market analysis reports
  • Comparable STR properties in the area
  • Average daily rate (ADR) projections
  • Estimated occupancy based on local market
  • Seasonal adjustments

Location and Market Factors

  • Tourist destination appeal
  • Local STR regulations and restrictions
  • Proximity to attractions or business centers
  • Seasonality considerations
  • Competition analysis

Important Disclaimer: STR income acceptance varies by lender program and market conditions. Not all markets or property types qualify.

Typical STR DSCR Loan Guidelines

While guidelines vary by lender and program, typical STR DSCR loan requirements include:

DSCR Requirements

  • Minimum DSCR: Often 1.00 or higher preferred
  • Lower DSCR options: May be available with compensating factors
  • Calculation: Based on projected or actual STR income vs. PITIA

Down Payment Requirements

  • Typical range: 25-30% down payment
  • Higher for no operating history: May require 30%+ down
  • Cash-out refinance: Generally 30-35% equity required

Credit Score Requirements

  • Minimum: Often mid-600s (typically 640-660+)
  • Preferred: 680+ for best rates and terms
  • Higher scores: May compensate for lower DSCR or limited history

Reserve Requirements

  • Typical reserves: 6-12 months PITIA
  • STR-specific: May require higher reserves due to income volatility
  • Multiple properties: Higher reserve requirements
  • Acceptable reserves: Cash, savings, retirement accounts (70% value)

Property Types

  • Single-family residences (SFR)
  • Condominiums (warrantability matters)
  • Townhomes
  • 2-4 unit properties (each unit can be STR)

Note: Owner-occupied STRs are NOT eligible. STR DSCR loans are for investment properties only.

STR-Specific Documentation Checklist

In addition to standard DSCR documentation, STR loans require:

Property Information

  • Property address and intended use (Airbnb/VRBO/STR)
  • Local STR permit or license (if required by jurisdiction)
  • HOA approval for short-term rentals (if applicable)
  • Proof property is zoned for STR use

Income Documentation

  • Operating properties: 12 months platform statements (Airbnb, VRBO, etc.)
  • New STR conversions: Market rent analysis or AirDNA report
  • Booking history showing revenue and occupancy
  • Expense documentation (cleaning, management, utilities)

Insurance

  • STR-specific hazard insurance policy quote
  • Liability coverage appropriate for short-term rentals
  • Proof of coverage for business use

Additional Requirements

  • Property taxes and HOA documentation
  • Entity documents (if purchasing in LLC)
  • Proof of assets and reserves

Who STR DSCR Loans Are For

Short-term rental DSCR loans are ideal for:

Active STR Operators

  • Current Airbnb or VRBO hosts expanding their portfolio
  • Investors with proven STR operating history
  • Property managers running vacation rentals

New STR Investors

  • Real estate investors entering the STR market
  • Long-term rental owners converting to STR
  • Buyers targeting vacation rental markets

Portfolio Investors

  • Investors with multiple STR properties
  • Those scaling beyond conventional loan limits
  • Mixed portfolio of LTR and STR properties

Investors Who Cannot Document Personal Income

  • Self-employed investors with complex tax returns
  • High-net-worth individuals seeking privacy
  • Foreign nationals investing in US vacation rental markets

STR DSCR Frequently Asked Questions

Can Airbnb income be used for DSCR loans?

Yes! Airbnb and other short-term rental platform income can be used to qualify for DSCR loans. Lenders typically require either 12 months of operating history from the platform or a market rent analysis showing projected STR income for the property.

Do I need a year of STR history to qualify?

Not always. While 12 months of operating history is preferred and may result in better terms, properties without STR history can qualify using market rent analysis or comparable STR data. Expect higher down payment requirements (often 30%+) for properties without operating history.

Are STR DSCR loans riskier than traditional DSCR loans?

STR income is generally more volatile than long-term rental income due to seasonality, market conditions, and occupancy fluctuations. For this reason, lenders often require higher down payments, higher reserves, and may price STR DSCR loans slightly higher than LTR DSCR loans. However, many markets show strong STR performance that can result in higher DSCR ratios.

Can I buy an STR property in an LLC?

Absolutely. STR DSCR loans fully support LLC ownership, which is common for vacation rental investors. You can purchase in a single-member LLC, multi-member LLC, or other entity structures. This provides liability protection and simplified tax management.

Are owner-occupied STRs allowed?

No. STR DSCR loans are for business-purpose investment properties only. The property cannot be your primary residence or second home, even if you plan to rent it out part-time. The property must be used exclusively for generating rental income.

What markets are best for STR DSCR loans?

Strong vacation rental markets with consistent tourism, business travel, or seasonal appeal perform best. Popular areas include beach destinations, mountain resorts, major metro areas with business travel, national park proximity, and established Airbnb markets. Markets with favorable STR regulations and high average daily rates are preferred.

How do lenders handle seasonality?

Lenders analyze annual income, not just peak season revenue. They review 12-month earnings patterns to account for high and low seasons. Market analysis considers occupancy fluctuations throughout the year. Conservative underwriting may discount peak season income.

Can I use projected Airbnb income for a property I haven’t purchased yet?

Yes, but documentation is critical. You’ll need a detailed market rent analysis or AirDNA-style report showing comparable STR properties, realistic occupancy projections, and average daily rates. Expect higher down payment requirements (typically 30%+) without operating history.

Why Choose FAAS Funding for STR DSCR Loans

STR Expertise

  • Specialized experience with Airbnb and vacation rental financing
  • Understanding of STR market dynamics and income verification
  • Access to lenders who actively finance STR properties
  • Guidance on documentation and market analysis requirements

Flexible Programs

  • Options for properties with and without operating history
  • Multiple investor types: new, experienced, and portfolio
  • Competitive down payment options
  • Various DSCR thresholds considered

Streamlined Process

  • Fast pre-approval (24-48 hours)
  • Clear guidance on STR documentation requirements
  • Experienced team familiar with vacation rental markets
  • Close in 21-30 days

Get Started with Your STR DSCR Loan

Ready to finance your Airbnb or vacation rental property? Our STR DSCR loan specialists understand the unique requirements of short-term rental financing and can help you navigate the process.

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Important Compliance Notice

STR DSCR loans are for business-purpose investment properties only. Properties must be used exclusively for generating rental income and cannot serve as primary residences or second homes. All properties must comply with local short-term rental regulations, zoning requirements, and HOA restrictions.

Apply Now or contact our STR DSCR specialists to discuss your vacation rental financing needs.