DSCR loan, how do lenders estimate income for Rent-by-Room on Mid-term rental (SFR)

[Rajul Vora]

Considering buying a single-family unit for mid-term rental to traveling nurses, etc. Each room will be rented separately.

How will lenders determine net income for calculating DSCR (ratio)? An LTR estimate will be much lower than an MTR estimate. E.g. a 4BR/2.5BA LTR estimate might be $2600/mo but using rent-by-room one could get $1800 (Master Bedroom) + $1000 (BR2) + $1000 (BR3) + $900 (BR4) = $4700/mo. These are not actual numbers but just for illustration purposes - though look quite realistic for the market I am considering based on Zillow, FurnishedFinder and other sources.

Vacancy rates for MTR are low due to an acute shortage of nurses. We can ignore vacancy rates for now.

Thanks in advance for your help.

[Robin Simon]

This is still a very tricky area for lenders as there are not many "industry-standard" tried and true rules - many DSCR Lenders and buyers of these loans are still wary of the SRO model - that being said, it is a lot easier and more flexible to underwrite on an acquisition if you are buying and the property could be utilized as a LTR / MTR or STR as that allows for a more tailored projection (as long as the property doesn't have unique or altered characteristics that would require it to be a SRO / MTR)