Short-Term Rental DSCR Loan: Why the Same Property Gets Approved by One Lender and Denied by Another
The short answer: Two DSCR lenders can look at the exact same short-term rental property, the same AirDNA income projection, and the same interest rate — and reach completely different underwriting decisions. The difference comes down to how each lender calculates short-term rental income. Knowing this before you pay for an inspection or appraisal can save you $1,400 or more.
What Most Investors Get Wrong About AirDNA
Most investors assume that if AirDNA projects strong rental income on a property, any DSCR lender will accept that number. That assumption is wrong — and it’s one of the most common reasons STR deals fall apart after money has already been spent.
AirDNA is a starting point, not a guaranteed figure. How much of that projection a lender will actually use varies significantly from one lender to the next.
The Three Ways DSCR Lenders Calculate Short-Term Rental Income
There is no uniform standard for how DSCR lenders calculate STR income. Every lender has their own approach, and the differences are significant enough to determine whether a deal gets approved or denied.
Method 1: 1007 Rent Schedule with Short-Term Rental Comps The most common approach. The lender orders an appraisal and instructs the appraiser to pull short-term rental comps specifically. The appraiser analyzes comparable STR properties in the area and produces a projected income figure. That number goes directly into the DSCR ratio calculation. This method is independent of AirDNA entirely.
Method 2: 100% of AirDNA Projection Some lenders accept the full AirDNA annual revenue projection as the income figure. This is the most favorable approach for borrowers because AirDNA projections tend to reflect strong market potential.
Method 3: 80% of AirDNA Projection (The Haircut) A growing number of lenders apply a 20% haircut to the AirDNA figure, using only 80% of the projected income. The reasoning: short-term rental income has more volatility than long-term rental income, and lenders want a conservative buffer built in.
The difference between Method 2 and Method 3 on the same property can be the difference between an approval and a denial.
Real Example: Same Property, Same Income, Two Different Outcomes
Property: 346 East Broadway Lane, Tempe, Arizona (3 bed / 2 bath, listed for sale) AirDNA projection: $50,100 annual revenue Cleaning fees buried in that figure: $6,690
Here’s the first trap: most lenders will not count cleaning fees as income. They’re a pass-through expense, not actual rental revenue. Strip those out and the usable income figure drops to $43,410.
Now run the numbers:
| Lender A (100% AirDNA) | Lender B (80% AirDNA) | |
|---|---|---|
| Purchase price | $635,000 | $635,000 |
| Down payment | 20% | 20% |
| Estimated rate | 6.5% | 6.5% |
| Full PITI payment | $3,610/month | $3,610/month |
| Monthly income used | $3,618/month | $2,894/month |
| DSCR ratio | 1.0 — approved | 0.80 — denied |
Same property. Same income. Same rate. One lender approves it. The other denies it. The only difference is how they calculated the income.
If you went into this deal without asking that question upfront, you could easily spend $600 on an inspection and $800 on an appraisal before finding out your lender uses the haircut method — and your deal is dead.
The Cleaning Fee Trap
This is one of the most overlooked details in STR DSCR underwriting. When you look up a property on AirDNA, the annual revenue figure includes cleaning fees charged to guests. That number can represent $5,000–$10,000 or more of the total projection.
Most lenders exclude cleaning fees from the income calculation because they’re not true rental income — they’re a reimbursement for a service cost. Always subtract cleaning fees from the AirDNA figure before running your DSCR math. Using the inflated number will give you a false read on whether the deal actually works.
The DSCR Ratio Requirement Varies Too
Beyond how income is calculated, some lenders set a higher DSCR ratio threshold for short-term rental properties specifically. While the standard for long-term rental DSCR loans is 1:1, some STR lenders require a 1.25:1 ratio — meaning the rental income needs to exceed the mortgage payment by 25%, not just cover it.
This is another question to ask before you go under contract:
- What DSCR ratio do you require for short-term rental properties — 1:1 or 1.25:1?
Questions to Ask Your Lender Before You Spend a Dollar
These questions should be answered before you pay for any inspection, appraisal, or due diligence:
- How do you calculate short-term rental income — 1007 rent schedule, AirDNA, or both?
- If AirDNA, do you use 100% or apply a haircut?
- Do you exclude cleaning fees from the AirDNA figure?
- What DSCR ratio do you require for STR properties — 1:1 or 1.25:1?
- Do you look at the AirDNA market score as part of your evaluation?
Getting these answers upfront costs nothing. Finding out the hard way after you’ve paid for due diligence costs real money.
FAQ
Why would the same STR property get approved by one lender and denied by another? Because lenders calculate short-term rental income differently. One lender may use 100% of the AirDNA projection while another applies a 20% haircut. That difference alone can push the DSCR ratio from just above 1:1 to just below it — turning an approval into a denial.
Does AirDNA include cleaning fees in its revenue projection? Yes. The annual revenue figure on AirDNA includes cleaning fees, which most lenders exclude from income calculations. Always subtract cleaning fees before using AirDNA numbers to estimate your DSCR ratio.
What is a 20% haircut on AirDNA income? Some lenders only use 80% of the AirDNA projection to account for the volatility of short-term rental income. For example, a $43,000 AirDNA projection becomes $34,400 at 80% — a difference significant enough to change whether a deal qualifies.
Do all STR DSCR lenders require a 1:1 ratio? No. Some lenders require a 1.25:1 DSCR ratio on short-term rental properties, meaning rental income must exceed the mortgage payment by 25%. Always confirm the ratio requirement before going under contract.
Can I use AirDNA myself to pre-screen deals before talking to a lender? Yes — AirDNA has a free version. It’s a useful pre-screening tool, but make sure to subtract cleaning fees from the revenue figure and understand that your lender may apply their own haircut to whatever number remains.
Why do lenders apply a haircut to STR income but not long-term rental income? Short-term rental income has more variability than long-term rental income — occupancy, seasonality, and market conditions affect it more significantly. Lenders apply a discount to build a conservative buffer into the underwriting.
I’m a short-term rental owner and operator myself, and I structure STR DSCR loans for investors nationwide daily. If you want me to run the numbers on a specific property and tell you exactly how the income would be calculated, reach out before you go under contract.
Austin Clarence | NMLS #1509690 | (650) 906-2376 | aclarence@nexalending.com