Short-term rentals can earn more per month than a traditional lease, but the income is less predictable, and lenders know it. If you are buying or refinancing an Airbnb or vacation rental, the way the lender counts that income is one of the biggest factors in your loan. Here is how it generally works with a DSCR loan.
The basic idea does not change
A DSCR loan compares the property’s income to its monthly payment (principal, interest, taxes, insurance and any HOA dues). The only real difference with a short-term rental is how the income is estimated. See our guide to calculating DSCR if you want the formula.
How lenders may measure short-term rental income
Methods vary by lender and program. Common approaches include:
- Actual booking history. For a property that is already operating, lenders may average gross rental income over the past 12 months, usually supported by platform statements or bank deposits.
- A market rental analysis. For a new purchase, a data-based projection of what comparable short-term rentals earn in the area may be used.
- A long-term rent estimate instead. Some programs ignore the vacation income and qualify the property on what it would rent for on a standard lease, which is often the more conservative number.
Some lenders also apply a discount to short-term income to account for vacancy, seasonality and management costs. Ask which method applies before you rely on a particular figure.
Things that can be different from a long-term rental
- Leverage. Maximum loan-to-value may be lower than for a comparable long-term rental.
- Pricing. The rate can be slightly higher to reflect the extra variability.
- Documentation. Expect to provide booking statements, a rental analysis and proof of local short-term rental permission where required.
- Local rules. Some cities and HOAs restrict or ban short-term rentals. A property that cannot legally operate as one will not qualify on that income.
Questions worth asking any lender
- How will you calculate the income: history, a market analysis, or a long-term rent estimate?
- Is there a discount applied to the income?
- What is the maximum loan-to-value for short-term rentals?
- What documents do you need to see for a property that is already operating?
- Does the property type or location change eligibility?
Before you make an offer
Check local short-term rental rules and HOA restrictions first, run conservative income numbers, and test the deal at a long-term rent as a backup. If the property only works at peak-season income, it is a tighter deal than it looks. The Deal Analyzer and the DSCR calculator are good places to pressure-test the numbers.