Short Term

The property must be suitable for short-term rentals, such as vacation homes, Airbnb properties, or other units with a history of short-term rental income.

Lenders often require a track record of the property's short-term rental income. This may include historical rental income statements or booking records.

Lenders assess the property's ability to cover debt obligations by calculating the DSCR. A DSCR greater than 1 indicates that the property's income is sufficient to cover its debt service.

Lenders may consider the property's historical and projected occupancy rates. Higher occupancy rates contribute to a more favorable DSCR.

A detailed property management plan may be required, outlining how the property will be managed, marketed, and maintained to maximize rental income.

Lenders perform a cash flow analysis to evaluate the property's ability to generate positive cash flow after covering operating expenses and debt service.

The borrower's credit score and financial stability are factors considered by lenders. A higher credit score may lead to more favorable loan terms.

The LTV ratio represents the loan amount as a percentage of the property's appraised value. Lenders may have specific LTV requirements for short-term rental DSCR loans.

The terms of the loan, including the interest rate, loan amount, and repayment period, will be specified by the lender. Short-term rental DSCR loans may have slightly different terms than traditional mortgage loans.

Lenders may require borrowers to have cash reserves or establish reserve accounts to cover potential shortfalls in rental income or unexpected expenses.

If the short-term rental property experiences seasonality in rental demand, lenders may consider how the property performs during low-demand periods.

Borrowers may need to demonstrate compliance with local zoning regulations, homeowners' association rules, and any legal requirements related to short-term rentals in the area.