Short-term rental income for DSCR purposes usually comes from trailing booking history, a third-party income projection, or an appraiser’s market analysis, and some reviews reduce gross revenue for operating costs. Because nightly rentals earn unevenly, model the year in seasons — nightly rate times booked nights for each — and test the ratio with and without an operating cost reduction.
Why STR income is harder to underwrite
A long-term rental has a lease: a contract that says what rent will be paid each month. A short-term rental has a booking calendar, and next year’s calendar does not exist yet. Revenue depends on nightly rates that shift with demand, occupancy that rises and falls with seasons and events, and operating costs that are much heavier than on a traditional rental. Any underwriting approach has to translate that uncertainty into a single monthly income figure for the ratio.
The three common income sources
Programs that accept short-term rental income generally rely on one or more of the following:
- Trailing booking history — statements from the booking platform or property management software covering a recent period, often twelve months, sometimes supported by bank deposits.
- Third-party income projections — data-provider estimates of what a property with a given location, size and amenity set is likely to earn.
- Appraiser analysis — a short-term rental market analysis prepared alongside the appraisal, using comparable nightly rentals.
Gross or net?
This is the question that moves the ratio most. Some reviews use gross booking revenue. Others reduce gross revenue by a percentage to reflect platform fees, cleaning, supplies and management. Projection-based approaches may already net out some costs. The same property can therefore produce noticeably different ratios under different methods.
Ask early which method a given program uses, and whether it applies a fixed reduction or looks at your actual expense history. If you self-clean or self-manage, your real costs may be lower than a standard reduction assumes, but the review may still apply the standard figure. Plan around the method, not your preferred outcome.
Our STR calculator handles this with a single operating cost share field. Run the model once with that field blank to see the gross-revenue ratio, then again with your best estimate of operating costs to see the net version. The truth for your scenario will likely sit somewhere in that range.
Building a three-season model
An annual average hides the shape of the year. A property that earns most of its revenue in summer looks the same on an annual basis as one that earns evenly, but the two carry very different risk. Splitting the year into peak, shoulder and off-season gives you a clearer picture.
For each season, estimate three things: how many months it lasts, the average nightly rate, and the share of nights you expect to book. Booked nights are months × the average days per month × occupancy. Revenue is booked nights × nightly rate. Add the seasons for gross annual revenue, apply any operating cost reduction, and divide by twelve for the monthly figure that feeds the ratio.
Where do the inputs come from? If you own the property, use your own history. If you are buying, look at the seller’s statements if available, comparable listings’ calendars and posted rates, and third-party data. Be wary of using a single great year as the baseline.
A worked example
Take a hypothetical property with three four-month seasons. In peak season it books 80 percent of nights at $250; in the shoulder season, 55 percent at $180; off-season, 35 percent at $130. Those are illustrative inputs, not market data.
Peak revenue is about 97 nights × $250 ≈ $24,333. Shoulder revenue is about 67 nights × $180 ≈ $12,045. Off-season revenue is about 43 nights × $130 ≈ $5,536. Gross annual revenue is about $41,914, or roughly $3,493 a month.
Against a monthly housing expense of $2,300, the gross-revenue ratio is about 1.52. Reduce gross revenue by a quarter for operating costs and the monthly figure falls to about $2,620, for a ratio of about 1.14. Same property, same bookings, very different read.
Notice also that peak season produces well over half the annual revenue. If peak occupancy slipped meaningfully in a given year, the net ratio could fall below 1.00. That is the scenario to plan reserves around.
Rules, permits and HOAs
Before modeling revenue, confirm the property can legally operate as a short-term rental. Many municipalities require permits or registration, cap the number of nights, or restrict short-term rentals in certain zones. Homeowner associations may prohibit them outright. Underwriters may ask for evidence of compliance, and a deal that only works as a nightly rental is exposed if local rules change. Build a fallback: what does the property produce as a long-term rental, and does that still cover the payment?
Business-purpose only
Short-term rental DSCR financing is for investment property. A vacation home that you or your family will use personally is not eligible for the business-purpose programs we arrange, even if you rent it out when you are not there.