-
DSCR loan cash-out refinance — how do lenders treat short-term rental income?
I have a single-family home that has been operating as a short-term rental for about two years, and I am considering a DSCR cash-out refinance to buy another property. When lenders calculate the DSCR on a property like this, do they typically use the actual short-term rental income from the tax returns, or do they switch to a long-term market rent estimate? I am also wondering whether there is a seasoning requirement for STR income on cash-out deals. Would appreciate hearing how lenders you have worked with have handled this.
-
1 Reply
-
DSCR Cash-Out Refinance on a Short-Term Rental: Actual Airbnb Income vs. Long-Term Market Rent
You might be able to use your actual short-term rental income to qualify for a DSCR cash-out refinance. Lenders have different ways of deciding what counts as qualifying rental income. Some will accept proof from Airbnb, VRBO, or property management, while others rely on the property’s estimated long-term market rent from an appraisal.
Since your single-family home has been a short-term rental for about two years, you have an advantage over investors who do not have an established income history.
Search for DSCR programs that allow short-term rental income for cash-out refinances. Keep in mind that not every lender will accept your property’s Airbnb income history.
How Do DSCR Lenders Calculate Income on Short-Term Rentals?
Lenders typically use one of three main approaches.
Actual Short-Term Rental Income
Some non-QM DSCR programs accept the property’s actual rental revenue from the past 12 months. You may need to show Airbnb or VRBO statements, property management reports, booking records, and matching bank deposit slips as proof.
Lenders often average your rental income over 12 months to account for seasonal changes. They might deduct platform fees, management costs, or make other adjustments that reduce your qualifying income.
For example, if your property brings in $72,000 a year in documented short-term rental income, the starting monthly average would be $6,000 before any adjustments. Some programs use this income to calculate the DSCR, rather than relying only on long-term rental comparisons.
Long-Term Market Rent From the Appraisal
Other DSCR lenders require a Single-Family Comparable Rent Schedule, also known as Form 1007. 1007. This form shows what the property could reasonably rent for under a standard lease. For example, your property might earn $6,000 per month from Airbnb, but an appraiser could find that the long-term market rent is only $2,500.
If your total mortgage payment, including principal, interest, taxes, insurance, and association fees, is $3,000, using the long-term rent would result in a DSCR of about 0.83.
If you use $6,000 of qualifying short-term rental income, your DSCR would be 2.00 before any adjustments.
This difference can have a big impact on your cash-out refinance options.
Third-Party STR Rental Analysis
Some programs accept independent short-term rental income reports, such as those from AirDNA or an appraiser. These reports examine similar vacation rentals, average daily rates, occupancy rates, seasonal trends, and expected rental income. Some lenders lower the projected income based on these reports. Others compare the projected income to your actual rental history and use the lower amount.
According to published DSCR guidelines, some programs accept 12 months of verified short-term rental income for refinances, while others require a more careful comparison to appraisal-supported rent.
Do they require your tax returns? Not always. One key difference between DSCR loans and traditional mortgages is that DSCR programs usually focus on the property’s cash flow instead of your personal adjusted gross income. For short-term rental cash-out refinances, some lenders do not require personal tax returns. A lender might use your documented rental income instead of the net profit shown on Schedule E or Schedule C. All types of revenue can qualify, but lenders may have specific rules for deductions or verification.
What Are the Seasoning Requirements?
There are two main seasoning requirements to keep in mind. For short-term rental income history, many programs want about 12 months of verified operating history, though the rules can vary. With two years of history, you are in a strong position for programs that accept actual past income.
Seasoning requirements are different. Some DSCR programs require you to own the property for a certain period before a cash-out refinance.
These rules vary by lender and depend on when you bought the property or put it up for sale. Since you have operated the property for about two years, you likely meet many common income-history requirements. Your eligibility for cash-out seasoning will still depend on when you purchased the property, its title history, and the lender’s guidelines.
Recommendations for Your Situation
I suggest finding a DSCR cash-out program that accepts your actual short-term rental income from the past 12 months and lets you use the cash-out funds to buy another investment property.
When ordering an appraisal, ask the account executive to confirm four things: if actual short-term rental revenue is acceptable for a refinance, whether the lender applies an income reduction or uses the lower of two figures, the maximum cash-out loan-to-value, and if you meet the ownership seasoning requirement.
Gather two years of Airbnb or VRBO income records, the most recent 12 months of bank deposit records, property management statements if you have them, and proof that short-term rentals are allowed at your property. The lender may require that cash-out proceeds be used for business or investment purposes, not personal expenses
Published STR DSCR programs can vary a lot. For example, Lima One Capital offers up to 70% loan-to-value for STR cash-out refinances, while other lenders require you to use the lower of your verified STR history or appraisal-supported rental income. Do not assume a DSCR calculation based only on long-term market rent will be accepted if your property has two years of documented short-term rental income.
Some DSCR programs are made for established Airbnb and VRBO properties. The main challenge is finding the program that best fits your situation.
I have not personally closed loans with any specific lenders, but their published guidelines show that both underwriting methods are used. To help narrow down your options, consider these questions: What state is your property in, and how much cash-out do you want compared to its current market value? These details can have a big impact on which STR DSCR programs you qualify for.
Log in to reply.