I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).

They get a higher return since they are covering housing cost, have the $250k per spouse primary residence deduction in gains, is a savings account, higher leverage position, lower interest rate possible, will pay more premium for location, etc.House might be overpriced for REITs but not for home owners.  

Tenants save money when using a shared meter, so there's plenty of room for error when calculating how to distribute the charges.

We love Duluth and the north shore and hope to "retire" there in the next handful of years.       

He's a retired cop and very good at property management. 

Just have $$ in savings

A majority of the sentiment from the listening session on the 18th was in favor of STRs and there were a lot of people who shared personal stories of their rentals or their business which support their life, family, and future retirement of inheritance for their families. 

I am the first in my family to do REI and my goal is to break the tradition of working for a salary for 40+ yrs only to retire on what I hope will be enough to start living freely.

Steve if you can go without buidling the extra garage below the ADU it will save a lot of money. if you can get two studios it will do much better than one ADU.

Cost to wait is maybe save couple grand on zoning attorney but could potentially make that up by earning some rent earlier (vs. unused space).