If you own short-term rental (STRs) properties and have tried to refinance through a conventional lender, you already know how that conversation usually goes. They look at your tax returns, see depreciation and write-offs doing their job, and tell you the income does not support the loan. What they are really telling you is that their product was not built for how you operate. A DSCR loan was.
What DSCR Actually Means for STR Investors
DSCR stands for Debt Service Coverage Ratio. In simple terms, it measures whether the income a property generates is enough to cover the loan payment. The key difference from a conventional loan is that qualification is driven by the property’s performance rather than your personal income. No W-2s, no tax returns, no personal income verification required.
That said, the property is not the only factor. Borrower credit profile and overall financial standing are still part of the picture. What DSCR changes is the primary lens through which a lender evaluates the deal. The asset leads, and a lender who understands STR investing knows how to read what it is telling them.
The Problem With Conventional Lenders and Airbnb Properties
Most conventional lenders do not know what to do with an Airbnb. Their models are built around long-term lease agreements, stable monthly rents, and borrowers who show consistent W-2 income. A property that generates $15,000 one month and $9,000 the next, depending on seasonality and occupancy, does not fit cleanly into their underwriting box.
So they either decline the deal or heavily discount the income to the point where the numbers no longer work. Neither outcome helps you.
DSCR lenders who specialize in STR portfolios understand that short-term rental income follows different patterns. They know how to read rental history, account for occupancy, and underwrite the property based on what it has actually produced.
How Qualifying Rent Is Calculated
This is where a lot of investors get surprised, in a good way. DSCR lenders do not just take your gross rental income at face value. They use a standardized calculation to determine qualifying rent, and understanding it upfront helps you know what to expect.
The calculation works like this: your annual net rent is divided by 12 to get a monthly figure, and that monthly amount is then reduced by 20% to arrive at qualifying rent. So if your property generated $180,000 in annual net rent, the qualifying monthly rent used in underwriting would be $12,000.
That figure then needs to cover the monthly loan payment at a minimum DSCR of 1.00.
Four Paths to Qualification
Not every STR property comes to the table with the same rental history. Here is how the qualification process works depending on where your property stands.
12 or more months of rental history: This is the cleanest path. Your actual rental statements from Airbnb, VRBO, a third-party property manager, or bank deposits are used to calculate your annual net rent. The 12-month figure is divided by 12, reduced by 20%, and that is your qualifying rent.
Less than 12 months of rental history: If your property has been operating for less than a year, the actual rents you have collected get annualized and the same calculation applies. A shorter track record means less data, but it does not automatically disqualify you.
No rental history: If the property has not yet operated as a short-term rental, a lender can use the appraiser’s opinion of short-term rental income from the appraisal report. That figure is still subject to the 20% reduction when calculating qualifying rent.
Long-term rent as an alternative: For any of the above scenarios, if long-term rental income supported by a 1007 rent schedule from the appraisal is strong enough to qualify the loan, that figure can be used instead. In this case the 20% reduction does not apply. If the long-term rent path works, it is often the simpler route.
A Real Example
One of the leading short-term rental company operators in Charleston recently refinanced a quadplex through Casa Lending. The property operates as four individual Airbnb units in North Charleston and had built 12 months of documented rental history. Because of that track record, the deal qualified for an $850,000 DSCR refinance with no personal income verification required.
This is not an unusual deal for us. It is exactly the type of transaction DSCR lending was designed for, and it is one that a conventional lender would have struggled to close.
What to Know About LTV
For STR investors evaluating a DSCR refinance, here are the parameters worth knowing upfront. Purchase transactions and rate and term refinances are available up to 75% LTV. Cash-out refinances go up to 70% LTV. Whether you are looking to pull equity out of a performing asset or restructure a high-rate loan, there is room to work with depending on your goals.
Is a DSCR Refi Right for Your Portfolio?
Not every STR property is ready for a DSCR refinance, and not every investor has the same objective. Some are looking to access equity to fund their next acquisition. Others want to lower their rate and improve cash flow on an existing asset. Some are thinking about both.
The right starting point is a conversation about where your portfolio is today and what you are trying to accomplish. From there, the structure of the loan follows the strategy.
Talk to the Casa Team About Your DSCR Strategy
If you own short-term rental properties, there is a good chance you have more financing options than you realize. Casa Lending specializes in DSCR loans for real estate investors and has closed over $1.2 billion in loans across our product line.
Start your application or reach out to discuss your portfolio. We are here to talk strategy, not just process paperwork.
