Can you use a DSCR loan for a short-term rental?
Yes — most DSCR lenders, including Oak & Iron Lending, will finance short-term rental properties. However, STR properties typically require a minimum DSCR of 1.0(compared to 0.75 for long-term rentals in our sub-1.0 program), and the way income is calculated is fundamentally different.
How do lenders calculate STR income for DSCR?
For long-term rentals, lenders simply use the lesser of the signed lease or the 1007 market rent appraisal. For short-term rentals, there is no signed lease — income fluctuates based on seasonality, occupancy rates, and platform performance.
Most DSCR lenders handle this in one of two ways:
Method 1: 24-month deposit history (most common)
The lender reviews 24 months of actual deposit history from your Airbnb, VRBO, or other STR platform. They calculate your average monthly gross income and then apply a 20% reduction to account for:
- Platform fees (Airbnb takes roughly 3–5% from hosts)
- Vacancy and seasonality risk
- Operating expenses not reflected in gross deposits
- Market uncertainty relative to a stabilized long-term lease
24-month average gross STR income: $4,200/month
After 20% reduction: $3,360/month qualifying income
Total PITIA payment: $2,800/month
DSCR ratio: 3,360 ÷ 2,800 = 1.20 ✓ Qualifies
Method 2: Market rent appraisal as long-term rental
Some lenders will order a standard 1007 appraisal to determine what the property would rent for as a long-term rental and use that figure instead of STR income. This approach ignores the STR premium entirely — but it is simpler and more predictable from the lender's perspective.
If your property generates significantly more as a short-term rental than it would as a long-term rental, always push for the 24-month deposit history method. It will typically result in a more favorable DSCR calculation.
What documentation do I need for an STR DSCR loan?
| Document | Purpose |
|---|---|
| 24 months of platform statements | Proves historical STR income |
| Bank statements (24 months) | Confirms deposits match platform reports |
| Current STR listing | Shows property is active and listed |
| Local STR permit (if required) | Confirms legal compliance in your market |
| Property appraisal (1007) | Establishes market value and rental comps |
Key STR DSCR loan requirements to know
- Minimum DSCR of 1.0 — most lenders require at least 1.0 DSCR on STR properties (sub-1.0 programs are usually not available for STRs)
- 24 months of STR history preferred — newer listings with less than 12 months of history will be harder to finance
- Local regulations matter — some municipalities restrict or require permits for STRs; lenders will want confirmation the property is legally operating
- Owner occupancy not allowed — DSCR loans are for investment properties only
- STR income from platforms only — direct bookings without platform statements may not be counted
Short-term rental DSCR loans are available and powerful — but they require at least 12–24 months of documented STR income history and a property that generates enough income to clear the 1.0 DSCR threshold after the 20% reduction is applied. If you are buying a new STR that has no operating history, you may need to use the long-term rent approach — or wait until the property has sufficient income documentation.
