DSCR loans on high-value short-term rentals: what actually gets underwritten.
On a $400,000 beach condo, a rental projection and a credit score get you most of the way. On a $6 million waterfront house, the projection is the least important document in the package. Here is what replaces it.
By Capituro8 min read
- Underwriting sizes an STR loan on one of three things: twelve months of actual bookings, an appraiser's short-term rent estimate, or the long-term market rent. At high values, the third one often wins.
- Zoning and the local rental ordinance get checked before the appraisal is ordered. If the property cannot legally rent under 30 or 90 days, the STR income is gone.
- Above roughly $3 million, most DSCR programs need an exception on loan size, coverage, or both. We know where those ceilings are, and the fallback is a lower loan, not a different projection.
Why high-value STRs are their own category
A DSCR loan tests the property's income against the payment. On a mid-priced rental, that test is forgiving: rents cover the payment with room to spare, and the lender's main questions are credit, reserves, and whether the rental history is real.
Push the value to $4, $5, or $6 million and every part of that test gets harder. The payment is large. The income that would cover it is only available if the property can actually operate as a short-term rental at a high nightly rate, all year, in a market that supports it. The carrying costs (taxes and insurance on waterfront property) are a bigger share of the payment. And the loan amount itself is above where most DSCR programs are built to operate.
So the underwriting shifts from "does the income cover the payment" to "what income can we prove, and what loan does that support."
What underwriting actually uses for STR income
There are three sources, and underwriting ranks them.
1. Twelve months of actual short-term rental history. Platform statements, a booking ledger, and bank deposits that tie to each other. This is the gold standard. Underwriting typically takes the trailing twelve months of gross bookings, deduct platform fees and a management or cleaning allowance, and use the result. A property with two full years of history at a stable number is an easy loan.
2. An appraiser's short-term rent estimate. On a purchase or a property with no history, some programs will order a short-term rental addendum, where the appraiser estimates nightly rate and occupancy from comparable listings and market data. Most programs haircut this estimate, and some cap the STR income at a multiple of long-term rent. It is a usable number, not a guaranteed one.
3. Long-term market rent. The appraiser's estimate of what the property would rent for on a twelve month lease. This is the floor. It is also, on a $6 million house, usually a number that does not come close to covering a $30,000 monthly payment, because long-term rent on luxury property does not scale with value.
A projection from a data service is not on the list. It can inform the appraiser's estimate, but sizing a $3.9 million loan on a $50,000-a-month projection with no history is a risk the borrower ends up paying for. We do not do it.
Zoning gets checked first
Before an appraisal is ordered on any STR loan, the local rules get pulled: the zoning district, the municipality's short-term rental ordinance, and, if there is one, the HOA's rental restrictions. Many Florida coastal municipalities restrict rentals under 30 or 90 days in single-family residential districts, and a growing number license and cap them. Event use, weddings and the like, is restricted separately and more tightly.
If the property cannot legally rent short term, the STR income does not exist for underwriting purposes, whatever the projection says. An appraiser will note the zoning. An underwriter will catch it. The only question is whether it gets caught before or after the borrower has paid for the appraisal.
Send the address. We pull the zoning and the rental ordinance before anything is ordered, and tell you whether the STR plan is underwritable.
The two carrying costs that move the number
Property taxes after a sale. In Florida, the homestead cap and the non-homestead assessment limits reset when a property sells. A house bought for $2.85 million from a long-time owner who was paying $28,000 in taxes can reassess to market value on the next January 1 and carry a bill closer to $90,000. Underwriting uses the new bill, not the old one, and on a DSCR test that $60,000 difference is $5,000 a month of coverage.
Insurance. Waterfront property at high values carries wind and flood coverage that can run well into five figures. A $6,500 premium on a $6 million Gulf-front house is either a mistake or a policy that is about to be replaced. Underwriting uses a realistic quote, and the appraiser will often note the gap.
Where the loan-size ceilings are
Most DSCR programs have a maximum loan amount, commonly in the $2 million to $3.5 million range, and a maximum LTV that steps down as the loan grows. Above the ceiling, the program needs an internal exception, and exceptions are granted on strong loan requests: clean rental history, coverage above 1.0x, a sponsor with liquidity, a property that is easy to value.
A request that needs an exception on loan size, another on coverage below 1.0x, and a third on income with no history is not an exception request. It is a different loan. At that point the honest conversation is about a lower loan amount, a rate-and-term refinance instead of cash out, or a short-term loan that gives the owner time to sell.
The worked example: a Gulf-coast house at $6.5 million
The ask. A cash-out refinance on a single-family waterfront house the owner had bought the previous December for $2.85 million and put about $1.2 million into. He wanted $3.9 million, a 60% loan on an estimated $6.5 million value, to pay off $3.35 million of bridge debt and hold the house three years as a short-term rental and wedding venue. Projected income: $50,000 a month.
What the package showed. The zoning came back single-family residential, in a city that does not allow rentals under 90 days in that district and does not allow event use there at all. The $28,000 tax figure was the prior owner's; the post-sale reassessment put the real number near $90,000. The insurance figure looked light for waterfront at that value. At $3.9 million and an interest-only rate near 6.9%, principal, interest, taxes, and insurance came to roughly $30,500 a month.
What the appraisal said. $6.5 million as-is, which confirmed the value. The value was never the problem.
Where it went. One program offered to underwrite on an STR narrative anyway. We declined it, because a loan that gets caught at underwriting or by the appraiser after the borrower has paid for the report is worse than no loan. Sized on long-term market rent, the coverage came in well under 1.0x at $3.9 million. The realistic options were a smaller loan, a rate-and-term refinance, or a short-term loan to bridge a sale. The house had been listed for three months without an offer, which said something about the value too.
What it means. On a high-value STR, the plan has to be legal before it can be underwritten. When the plan does not hold, we size on income the property can actually earn, and we tell the owner before the appraisal, not after.
Figures are rounded and the property is not identified. Terms vary by lender and change without notice.
High-value rental, cash-out in mind? Send the address and the booking history, and we will tell you what closes at this loan size.
Luxury condos: the same rules, plus the building
A $2 million new-construction condo in a coastal tower brings its own list: whether the building is warrantable (owner-occupancy ratio, developer control, commercial space on the ground floor, certificate of occupancy), whether the HOA allows short-term rentals, and how the lender treats a leaseback if the developer is renting the unit back as a sales model. Seller concessions are usually available within a limit, often around 6% on our programs. Seller-held second liens are usually not. And a lease where the seller is the tenant is something to raise with us on day one, not something to discover in the purchase contract at closing.
Frequently asked
Can I get a DSCR loan on a short-term rental with no rental history?+
What loan amount can a DSCR program go to on a luxury STR?+
Does underwriting check whether short-term rentals are allowed?+
Why did my property taxes go up so much after I bought?+
Can seller financing help me buy a high-value condo with less down?+
Where this leads next
Cash-Out Refinance
Pull equity from a rental, an apartment building, or a commercial property.
Open1 to 4 Unit DSCR
Long-term loans for houses, condos, and small rentals, sized on the rent.
OpenWhy the appraisal comes in low
The building is full, the rents are up, and the appraisal still came in $300,000 under what you expected.
OpenSend the address and the rental history before you order anything.
We will pull the zoning, check the ordinance, and size the loan on income the property can legally earn, so the number you see is one that closes.