Short-Term Rental (STR) Properties: Qualification and Guidelines

Rule

Lendency allows for the financing of Short-Term Rental (STR) properties, provided they meet specific income verification and eligibility standards. For all Purchase transactions, the DSCR is calculated using the Long-Term Market Rent (LTMR) as determined by the appraiser (Form 1007). For Refinance transactions, we may use actual short-term rental history only if the borrower can provide a minimum of 12 months of documented history from their own ownership period. If 12 months of borrower-specific history is not available, the loan will be qualified based on the LTMR from the appraisal.

Lendency Insight

While many investors focus on the high daily rates of vacation rentals, our underwriting approach prioritizes the long-term stability of the asset. By using the long-term market rent for purchases, we ensure the property remains a viable investment even if short-term market trends shift. For seasoned investors who have managed a property for at least a year, we allow the actual revenue history to be used for a refinance, provided it is verified through third-party platform reports and consistent bank deposits.

Borrower Additional Document Requirements

To utilize short-term rental history or qualify an STR property, the following documentation is required:

  • Proof of Current Listing: A screenshot or link to the current active listing on platforms such as Airbnb, VRBO, or a professional property management site.

  • 12-Month Historical Reporting: Comprehensive reports showing the last 12 months of rental income (e.g., Airbnb "Earnings" exports or monthly management statements).

  • Verification of Deposits: The most recent two (2) months of bank statements must evidence rental deposits from a third-party short-term rental platform.

Common Scenarios & FAQs

  • What are the minimum and maximum loan amounts for STR properties? The minimum loan amount is $150,000 and the maximum is $2,000,000. However, your maximum loan amount is also tied to your FICO score:

    • 720+ FICO: Eligible for the full $2,000,000 (subject to LTV caps).

    • 700-719 FICO: Capped at a maximum loan amount of $1,500,000.

    • 680-699 FICO: Capped at a maximum loan amount of $1,000,000.

    Additionally, any loan amount exceeding $1,500,000 is subject to a maximum LTV of 65%.

  • How is the maximum LTV (Loan-to-Value) determined? Maximum LTV is determined by your FICO score and the type of transaction.

    • 720+ FICO: 80% for Purchase; 75% for Rate/Term and Cash-Out Refinance

    • 700-719 FICO: 75% for Purchase and Rate/Term Refinance; 70% for Cash-Out Refinance

    • 680-699 FICO: 75% for Purchase; 70% for Rate/Term Refinance; Ineligible for Cash-Out Refinance

  • Can I refinance a property that is currently vacant or being furnished? Yes, however, if the property is vacant, not yet furnished, or not ready for occupancy on a refinance transaction, we require additional documentation to verify the intended short-term rental use (such as evidence of an active STR listing).

  • Can I use history from the previous owner for a purchase? No. To use actual STR income, the 12-month history must be from the current borrower. For all purchases, we rely strictly on the appraiser’s estimate of what the property would rent for on a long-term basis (LTMR).

  • Are all property types eligible? No. Eligible properties are limited to Single Family Residences and PUDs/Townhomes (Attached/Detached). Ineligible property types include Condominiums, 5+ unit residential properties, and Mixed-Use properties.

  • Is a Guarantor required? Yes. All STR loans require at least one individual to serve as a personal guarantor for the borrowing entity.

Key Definitions

  • Long-Term Market Rent (LTMR): The estimated monthly rent the property would command if leased on a traditional, unfurnished 12-month basis as determined by the appraiser.

  • Seasoned History: A minimum of 12 months of continuous rental performance under the current borrower's ownership.

  • AMC (Appraisal Management Company): An independent entity that fulfills real estate appraisal assignments on behalf of lenders, ensuring the valuation process is free from undue influence.

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