DSCR Loan Products for STR's

[Dylan F.]

Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.

I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?

I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!

[Robin Simon]

Quote from @Dylan F.:

Hey all - wanted to see if anyone out there has used a DSCR loan for an STR. I have a few STR's all under conventional loans in my personal name (title is in LLC though), which is effecting my DTI/shows up on my credit. I am a high W2 income earner, but need to start buying under my LLC, as eventually my DTI won't be sufficient enough to secure lending.

I'm wanting to know a couple things:
1. What kind of rates/terms can I expect from a typical DSCR loan on a STR in the current environment?
2. What proof of revenue is typically used? (AirDNA, my personal Airbnb history, etc?)
3. Where would you start your search for the DSCR loan products/ are there any places you'd recommend shopping first?

I'm in Fort Worth area, and would love to connect with any fellow local investors as well. I appreciate the help, thanks!

 Hi Dylan - I just wrote an article for BiggerPockets on this exact subject.  Its getting published in a couple weeks but heres a preview:

Short Term Rental DSCR Loans – Differences among Lenders

In sum, DSCR Loans, while a little more expensive than the Conventional or Second Home Loan alternatives, are often the best bet to finance short term rentals due to the relative lack of restrictions and investor-friendly flexibility. However, not all DSCR Lenders are the same when it comes to Short Term Rentals, in fact, many DSCR Lenders don’t even lend on STRs at all, restricting their offerings to properties utilized as long-term rentals only!

Thus, if scaling a short term rental portfolio with DSCR Loans, its crucial to know your DSCR Lender’s guidelines when it comes to STRs. Generally, DSCR Lenders fall into three buckets:

1. Traditional DSCR Lenders that do not lend on properties utilized as short term rentals
2. DSCR Lenders that lend on STR properties, however do so conservatively, either requiring the property to qualify as if it were utilized as a long-term rental; or require 12 full months of documented operating history on a STR platform.
3. DSCR Lenders that fully embrace short term rentals, and underwrite utilizing cutting-edge technology tools such as revenue projections from leading data sources such as AirDNA, financing multi-unit STR properties (even 5+ units) and embracing seasonal vacation markets that don’t have traditional long-term rental markets.

Rates have unfortunately ticked up lately - you are probably looking at something in the 8%-9% range if it only qualifies as a STR.