Short-term rental income treatment is the most variable factor in DSCR underwriting. Two lenders looking at the same property can arrive at qualifying figures nearly double apart.
These questions cover the three approaches and how to prepare for each.
Quick answer
Lenders count STR income three ways: documented booking revenue, discounted booking revenue, or substituted long-term market rent. On a property earning well above long-term rent, the difference can determine whether it qualifies at all.
Frequently Asked Questions
What are the three approaches?
Actual documented booking revenue, actual revenue with a discount applied for seasonality and vacancy, or substituted long-term market rent regardless of actual performance.
Which lenders use actual revenue?
Those with dedicated short-term rental programs, generally. It is not the default across the market, so confirm rather than assume.
How much discount do lenders apply?
It varies considerably where discounting is used. Ask for the specific percentage rather than accepting a general statement that revenue is discounted.
Why would a lender ignore actual revenue entirely?
Because short-term revenue depends on active management, platform dynamics, and local regulation — all of which can change. Long-term market rent is a more conservative floor.
What documentation supports actual revenue?
Platform statements covering ideally twelve months, bank deposits corroborating them, and tax documents reporting the income. More history is better.
How much history do lenders want?
Twelve months is the common preference, since it captures full seasonality. Shorter histories may be discounted more heavily or rejected in favor of market rent.
What if the property is newly converted to STR?
With limited history, expect conservative treatment. Some lenders will use a partial-year annualized figure; others default to market rent.
Do third-party revenue projections help?
Some lenders accept projections from recognized STR data providers. Acceptance varies, so ask before commissioning one.
How does seasonality affect the calculation?
Lenders using actual revenue typically annualize across twelve months rather than using peak months. A property with concentrated seasonal income may also face higher reserve requirements.
Does the platform matter?
Generally not which platform, though consolidated documentation across all booking channels is important if you use several.
What about direct bookings?
Include them, with documentation — booking records and corresponding deposits. Revenue outside platform statements needs its own support.
Are cleaning fees included in revenue?
Treatment varies. Some lenders count gross revenue including fees; others net them out as they correspond to a direct cost. Ask specifically.
Do management fees get deducted?
In most residential DSCR calculations, no — the calculation uses gross revenue. This differs from commercial underwriting.
How does regulation affect income treatment?
Lenders in markets with restrictive or uncertain STR regulation may apply market rent regardless of performance, since the income stream carries regulatory risk.
What if my city restricts STRs after I close?
This is the core risk. Model whether the property covers its debt as a long-term rental, because that may become your only option.
Does a mid-term rental get different treatment?
Sometimes. Thirty-day-plus furnished rentals sit between STR and long-term, and some lenders treat them closer to traditional leases.
Can I qualify on market rent and operate as an STR?
Often yes. If the property covers its debt on long-term market rent, you can still operate it short-term. This is the most conservative and resilient structure.
Which approach should I plan around?
Market rent, as your baseline. If the deal works on that basis, actual STR revenue becomes upside rather than a requirement.
How do I find lenders using actual revenue?
Ask directly and get the answer in writing. Programs marketed as short-term rental products are more likely to count actual revenue, but confirm the specific methodology.
What is the most expensive mistake here?
Going under contract assuming actual booking revenue will be used, then discovering after the appraisal that market rent applies and the property no longer qualifies.
