Short-Term Rental (STR)
What is a Short-Term Rental?
A property leased on a nightly, weekly, monthly, or seasonal basis — Airbnb, VRBO, FlipKey, Vacasa.
A short-term rental (STR) is an investment property rented to guests on a nightly, weekly, monthly, or seasonal basis rather than under a traditional 12-month lease. The vast majority of STRs are marketed on platforms like Airbnb, VRBO, and FlipKey, or operated by a property-management company like Vacasa.
Unlike a long-term rental, STR income is highly variable — peak-season nightly rates can be multiples of a comparable monthly lease, while shoulder and off-seasons may produce very little revenue. STR underwriting therefore looks at a full twelve-month cycle, not a single month or season.
STRs typically generate higher gross rents than long-term rentals in the same neighborhood, but they also carry higher expenses: cleaning, supplies, dynamic pricing tools, platform commissions, and higher utility/insurance costs. Most STR underwriting models apply an expense factor (often 20%) to gross rents to reflect this.
How Short-Term Rentals work at Total Quality Lending
Total Quality Lending’s DSCR Short-Term Rental loan underwrites STR income using a 12-month average of actual gross rents with a 20% expense factor (or the property’s actual expenses if higher). When the property is a purchase with no operating history, TQL accepts an AirDNA Rentalizer report provided the AirDNA Market Score is 60 or higher.
On standard DSCR loans, STRs are eligible up to 80% LTV on purchase and 75% LTV on rate/term or cash-out refinance. Foreign-national borrowers on the FN DSCR program are capped at 70% purchase / 65% refinance for STRs. Condo-hotel projects are excluded from STR treatment on the FN program.