DSCR Loan Products for STR's
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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votesQuote from @Dylan F.:
Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.
I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?
I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!
Hi Dylan - I just wrote an article for BiggerPockets on this exact subject. Its getting published in a couple weeks but heres a preview:
Short Term Rental DSCR Loans – Differences among Lenders
In sum, DSCR Loans, while a little more expensive than the Conventional or Second Home Loan alternatives, are often the best bet to finance short term rentals due to the relative lack of restrictions and investor-friendly flexibility. However, not all DSCR Lenders are the same when it comes to Short Term Rentals, in fact, many DSCR Lenders don’t even lend on STRs at all, restricting their offerings to properties utilized as long-term rentals only!
Thus, if scaling a short term rental portfolio with DSCR Loans, its crucial to know your DSCR Lender’s guidelines when it comes to STRs. Generally, DSCR Lenders fall into three buckets:
- Traditional DSCR Lenders that do not lend on properties utilized as short term rentals
- DSCR Lenders that lend on STR properties, however do so conservatively, either requiring the property to qualify as if it were utilized as a long-term rental; or require 12 full months of documented operating history on a STR platform.
- DSCR Lenders that fully embrace short term rentals, and underwrite utilizing cutting-edge technology tools such as revenue projections from leading data sources such as AirDNA, financing multi-unit STR properties (even 5+ units) and embracing seasonal vacation markets that don’t have traditional long-term rental markets.
Rates have unfortunately ticked up lately - you are probably looking at something in the 8%-9% range if it only qualifies as a STR.
Harpoon Capital514 Reviews
17 Replies
- 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Dylan F.:
Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.
I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!
Hi Dylan - I just wrote an article for BiggerPockets on this exact subject. Its getting published in a couple weeks but heres a preview:
Short Term Rental DSCR Loans – Differences among Lenders
In sum, DSCR Loans, while a little more expensive than the Conventional or Second Home Loan alternatives, are often the best bet to finance short term rentals due to the relative lack of restrictions and investor-friendly flexibility. However, not all DSCR Lenders are the same when it comes to Short Term Rentals, in fact, many DSCR Lenders don’t even lend on STRs at all, restricting their offerings to properties utilized as long-term rentals only!
Thus, if scaling a short term rental portfolio with DSCR Loans, its crucial to know your DSCR Lender’s guidelines when it comes to STRs. Generally, DSCR Lenders fall into three buckets:
- Traditional DSCR Lenders that do not lend on properties utilized as short term rentals
- DSCR Lenders that lend on STR properties, however do so conservatively, either requiring the property to qualify as if it were utilized as a long-term rental; or require 12 full months of documented operating history on a STR platform.
- DSCR Lenders that fully embrace short term rentals, and underwrite utilizing cutting-edge technology tools such as revenue projections from leading data sources such as AirDNA, financing multi-unit STR properties (even 5+ units) and embracing seasonal vacation markets that don’t have traditional long-term rental markets.
Rates have unfortunately ticked up lately - you are probably looking at something in the 8%-9% range if it only qualifies as a STR.
Harpoon Capital514 Reviews - Lender · Dallas, TX · Member since 2023 · 71 posts · 19 votes3y
Hi Dylan,
I am in Dallas and would be happy to connect.
For your STRs, were they all acquired during this calendar year? If they reflect on your tax returns lenders do have ways to use the rental income to offset it.However you are correct when it comes to a DSCR loan making qualifying easier and it would be a business loan.
1) Typically you would want to expect rates about 1% higher than a conventional invsestment properties ranging from the mid 8s to mid 9s right now depending on the specifics of the loan. (Purchase vs cash-out refi, LTV, fico score, etc.)2) You will find lenders differ on this. Some will only go based on the market rent of the property determined by the appraiser and some will allow you to use your actual rent history but you typically need to have 12 months of it to show. One additional factor that is important to rates is your rent compared to the projected payment. If your history indicates renting a property for 4k/mo and your PITIA is 3k/mo, that would be a DSCR ratio of 1.33% which is going to yield great rates. Lenders typically want you over 1% but some will go down to .75%.
3) There are many lenders in DFW I am sure you will hear from with your post. However there is a Build Your Team function at the top that allows you to search specifically for DSCR lenders that work with BP.Feel free to shoot me a message if you want to run a specific scenario. Good luck!
- Investor · Ventnor City, NJ · Member since 2016 · 41 posts · 34 votes3y
Hi Dylan!
I just talked to my DSCR lender in Denver- she did one in January for us. Rates were the same as in January - 7.75% with 1 point origination fee. That was on a $435K loan. The easiest loan I ever used in terms of paperwork and speed. They did, however, base the value on the appraised full-time rental rates. We rent it as an MTR, which was our intent. I guess you would classify that lender as a #2 type in @Nick Conley's descriptions.
Best of Luck to you!
- Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes3y
Hey Dylan!
STR DSCR specialist here. To answer your questions:
1) Rates have ticked up recently, as noted above, and as a result, your probably looking at something in the 8%-9% range on a 30 yr note.2) Depends on the scenario. For your scenario specifically, if you have a year of history, or at least enough history to cashflow, the trailing twelve months transaction history will be used (i.e what did your STR earn in the past year.) If you have less than a year of history, with a good explanation behind why (for example, property just exited rehab) Air DNA can be used. Make sure to find an Air DNA lender that can explicitly underwrite with Air DNA.
3) There is a list of recommended lenders via BP for both DSCR and specifically STRs. That would be a good place to start.
- 3yAlex BekezaBusiness MemberLender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment? 7s and 8s depending on LTV, FICO, DSCR, and price vs. credit chosen. (30 and even 40 year fixed!)
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?) Actuals if you have 12 + months not to exceed 110% of Air DNA or 80% of Air DNA actual historical P & Ls aren't available.
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first? Right here on BP :) .Check references.
Investor Property Loan5306 Reviews - 3yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Dylan F.:
Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.
I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!
Hey Dylan,
There are many ways to answer these questions and it honestly depends on your circumstance. Have all of your STRs been booked for the past 12 months? How much are you looking to put down? Do you plan on refinancing to drop the interest rate in the next year or two?
I would recommend starting with a broker. It will save you on surprises and underwriting killing your deal.
LuxePrivate Investments LLC 572 Reviews - Lakeland, FL · Member since 2018 · 243 posts · 148 votes3y
Quote from @Dylan F.:
Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.
I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!
The first and best idea would be to call a local lender and ask him/her all of the above.
Best,
Brandon - 3yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
Hey Dylan, I would look for a broker who specializes in STR and DSCR. It would save you the time talking to one lender at a time.
ProAlpha Capital56 Reviews - 3yBonnie LowPro MemberLender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
Quote from @Alex Bekeza:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment? 7s and 8s depending on LTV, FICO, DSCR, and price vs. credit chosen. (30 and even 40 year fixed!)
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?) Actuals if you have 12 + months not to exceed 110% of Air DNA or 80% of Air DNA actual historical P & Ls aren't available.
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first? Right here on BP :) .Check references.Can you explain what you mean by price vs. credit chosen?
- 3yAlex BekezaBusiness MemberLender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
@Bonnie Low Yes, so in general, each rate has a certain price or credit associated with it. There's a par rate and then below that there are rates that are "bought down" and above that there are rates that come with a credit towards your closing costs.
Investor Property Loan5306 Reviews - 3yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
There are lenders that will use AirDNA to underwrite a loan for a purchase. The terms vary based on the lender They will use 80% of the projected AirDNA rents for a purchase if SFR or 75% for 2-4 units. For a refinance, they will want a 12 month STR history.
For a purchase, there are lenders that will lend with 20% down for a single family rental SFR or 25% for 2-4 units.
Rates are currently in the 8s to 9s for these types of products.
Working with a mortgage broker will help you as your situation will be shopped to different lenders to get you the best rate and terms.
Bright Skyline518 Reviews - 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Alex Bekeza:
@Bonnie Low Yes, so in general, each rate has a certain price or credit associated with it. There's a par rate and then below that there are rates that are "bought down" and above that there are rates that come with a credit towards your closing costs.
Yes - generally lenders make money in 2 ways - by the interest rate yielding a premium and originations "points" collected at closing. So some lenders will be agnostic on how they earn their profit on a particular loan, such as giving options like "8% and no points charged at close" or "7% and 3 points charged at close"
Harpoon Capital514 Reviews - 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Stacy Raskin:
There are lenders that will use AirDNA to underwrite a loan for a purchase. The terms vary based on the lender They will use 80% of the projected AirDNA rents for a purchase if SFR or 75% for 2-4 units. For a refinance, they will want a 12 month STR history.
For a purchase, there are lenders that will lend with 20% down for a single family rental SFR or 25% for 2-4 units.
Rates are currently in the 8s to 9s for these types of products.
Working with a mortgage broker will help you as your situation will be shopped to different lenders to get you the best rate and terms.
Generally accurate but the "80% of AirDNA" isn't universal among DSCR Lenders that utilize that tool. There are some out there that will use up to 100% of STR projected income, whether thats from AirDNA or the 1007!
Harpoon Capital514 Reviews - 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Brandon P.:
Quote from @Dylan F.:
Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.
I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!
The first and best idea would be to call a local lender and ask him/her all of the above.
Best,
BrandonI would disagree with this - "local lender" in my view is outdated, in the age of the internet and websites like BiggerPockets that offer nationwide lender information at your fingertips, the best course of action is shopping among all the lenders nationwide rather than boxing yourself in to whoever happens to have a brick and mortar shop in your local market
Harpoon Capital514 Reviews - 3yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 508 votes
Quote from @Robin Simon:
Quote from @Stacy Raskin:
There are lenders that will use AirDNA to underwrite a loan for a purchase. The terms vary based on the lender They will use 80% of the projected AirDNA rents for a purchase if SFR or 75% for 2-4 units. For a refinance, they will want a 12 month STR history.
For a purchase, there are lenders that will lend with 20% down for a single family rental SFR or 25% for 2-4 units.
Rates are currently in the 8s to 9s for these types of products.
Working with a mortgage broker will help you as your situation will be shopped to different lenders to get you the best rate and terms.
Generally accurate but the "80% of AirDNA" isn't universal among DSCR Lenders that utilize that tool. There are some out there that will use up to 100% of STR projected income, whether thats from AirDNA or the 1007!
Right, that's why I said "some lenders." Different lenders have different criteria. Most use 100% of the 1007 appraisal market rent survey and for AirDNA, there's usually an expense factor taken.
Bright Skyline518 Reviews - 3yNick BelskyBusiness MemberResidential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
I think everyone answered your question about the STR lending fairly well. I want to address your other comments. I am a licensed LO that works with many investors and does primarily investment properties. I can assure you that using a DSCR loan to "get the loan off your credit" does nothing for you in terms of qualifying for a conventional/agency loan. The underwriters will find that you have other active loans, even if under an LLC that you are tied to, and you will need to include it in your DTI calculation. The idea of not having a loan on your credit report frees you of the DTI constraint is completely false. Not disclosing these other loans on your 1003 application is fraudulent as you are purposely omitting information. I have heard of some who form entities in Wyoming or Delaware not get "caught' on this, but have never seen it myself.
There is only one way I know of to not have an active loan count in your DTI. Your private/DSCR/HML etc... has to be done on a commercial note with no personal guarantee. The taxes, insurances, and HOA must all be under the entity name. Then, for your conventional financing, you must underwrite with Freddie Mac. Fannie Mae does NOT offer this concession. If all the above are met, then you might have a lender not count it in your DTI. Even though Freddie will allow it, many lenders will not. I've literally had a lender on the phone with Freddie where the Freddie rep confirmed it did not need to be counted and the lender still forced it to be used. Have had it go the other way as well. It's a 50/50 shot.
My point is, have the correct information before you setup a plan around getting a conventional mortgage with several loans out there. As of right now, it appears you've been fed incorrect info on Credit Reporting and Conventional Guidelines.
Cheers!
Belsky Mortgage, LLC522 Reviews - Lender · Franklin, TN · Member since 2026 · 59 posts · 11 votes1w
Not every DSCR desk will touch STRs — some force long-term market rent only, some want 12 months of platform history, and a smaller set will underwrite AirDNA-style projections on purchase. Shop that guideline first, then price: LTV, DSCR floor, prepay, and whether they haircut projected STR income. LLC vesting helps the entity plan, but personal guarantees still show up for future conventional DTI in a lot of cases, so dont treat DSCR as a magic "off credit" switch. Get two STR-capable term sheets on the same property before you assume conventional is dead.
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