The Quick Read: A two-unit condo leaving short-term rental use is financed on its long-term rent, which means a signed lease or the appraiser’s monthly market rent replaces booking history as the income that sets the coverage number. Three things decide the file: legal rental use under the condo documents, supported rent for each unit, and whether the condo project itself is eligible.
- Qualifying income becomes lease or appraiser market rent, not nightly revenue. Expect the figure to be lower.
- The coverage ratio is monthly rent divided by PITIA, and HOA dues sit in the denominator.
- Most programs use the lower of the in-place lease or market rent, so an above-market lease does not lift the ratio.
- Two-unit condo can mean one unit in a condo regime or both units of a building held in condo ownership. Appraisal form and rent test differ.
- Select programs in the network start at 1.00 coverage. A separate select-lender path goes below 1.00, with leverage and terms adjusted.
Investors converting a unit to monthly leases often assume the STR track record follows the property into the new loan. It doesn’t. Once the unit is leased monthly or longer, underwriting treats it as an ordinary long-term rental. That is simpler in some ways and tighter in others. The rest of this piece walks the file from classification to closing documents. For the broader program picture, see the complete DSCR loans guide.
Short-Term Rental Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your nightly rate, occupancy, taxes, and insurance for a more accurate picture.
Short-term rental income is documented with a 12-month history or a market data report. Program parameters update from Lendmire’s centralized guideline source.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Nightly rate, occupancy, taxes, and insurance are editable estimates. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Key Terms Defined
DSCR (debt service coverage ratio): Qualifying monthly rent divided by the monthly PITIA obligation.
PITIA: Principal, interest, taxes, insurance, and association dues. For a condo, the dues are part of the denominator.
Market rent: The monthly rent an appraiser concludes from comparable long-term rentals.
Rent schedule: The appraisal exhibit that supports market rent. For one condo unit it is the single-unit comparable rent form. A 2-4 unit income property uses the small residential income report with rent per unit.
Warrantable condo: A project that meets agency secondary-market eligibility. Non-warrantable is an agency label, not a finance-ending one in the non-QM world.
Condo questionnaire: The lender’s form completed by the association. It reports owner/renter mix, reserves, litigation, and other project facts.
What Does “Two-Unit Condo” Actually Mean?
It can mean two different collateral setups, and the file changes with each.
In the first, the building sits in a condo regime and each of two units is its own legal unit. The investor buys or refinances one of them. The appraisal looks like any condo: one unit, one rent conclusion. The project review matters, because the lender is underwriting the association as much as the unit.
In the second, the investor holds both units of a two-unit building under condo-style ownership. That is a 2-4 unit income property. The appraiser supports a rent conclusion for each unit, and the file carries two leases and a rent roll.
Pin this down first. Mixing the two readings is how a file gets the wrong appraisal ordered.
How Underwriting Treats the Conversion
Start with the appraisal logic, because it explains the whole conversion. Fannie Mae’s appraiser guidance describes the rent schedule as an estimate of monthly market rent, usable for condo investment properties, and says the nightly fee of a short-term rental can’t be estimated on that form. DSCR loans are not agency products. The forms matter only because DSCR appraisals borrow the format.
McKissock explains why STRs are a poor fit for that form: they involve furniture, fixtures and equipment, and a booking agreement instead of a lease, while the form collects comparable monthly rentals. Class Valuation makes the same point: the form measures rent driven by the real property, and many STRs earn well above that.
Convert the unit to monthly leases and that mismatch disappears. The appraisal can answer the income question directly. That is the core of the conversion.
The File, Step by Step
1. Classify the collateral. One condo unit or a two-unit building. Then decide whether the project is warrantable, non-warrantable, or a condotel. Across the wholesale network, many programs finance non-warrantable condo projects, though leverage and loan size are often adjusted. Typical triggers are heavy investor or renter concentration, thin reserves, pending litigation, and a high share of short-term rental use in the building.
2. Confirm the association allows the new use. A 12-month lease is usually easier on HOA rules than the STR was. The lender still reviews the condo documents and the questionnaire. The association often can’t say whether the project is warrantable. The questionnaire does that work, so order it early. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
3. Switch the income evidence. Booking history stops being the proof. The file carries an executed lease at market rent, proof of first month’s rent and deposit if newly leased, and for a two-unit building a rent roll listing unit, tenant, rent, and lease end date. If the unit is vacant, the appraiser’s market rent stands alone.
4. Order the appraisal. It does two jobs: value and market rent. On a two-unit building the appraiser must support rent for each unit. Rent supported on the stronger unit can’t be assumed for the other.
5. Run the ratio. Qualifying monthly rent divided by PITIA. Because dues are in the denominator, a high-assessment condo drags coverage harder than a comparable house.
6. Pick the rent used for lender review. Most programs use the lower of in-place lease or appraiser market rent. A two-unit file sums the unit-level figures. A vacant unit uses market rent, and coverage often drops until a lease is documented.
7. Match the program parameters. For leverage, credit, and reserves, the network’s numbers apply, covered below.
What Changes on Conversion
| Factor | As STR | As LTR |
|---|---|---|
| Income basis | Booking history or projection | Lease or market rent |
| Appraisal support | Rent analysis plus platform data | Rent schedule comps |
| Typical haircut | Expense factor varies by lender | Generally none |
| Rent level | Often higher | Generally lower |
| Local-rule risk | Permit and ban exposure | Lease terms and HOA rules |
The expense factor point cuts both ways. A long-term file avoids that, but starts from a smaller rent figure. Run both ratios before committing. On many properties the long-term number is the weaker of the two, and the gap is a decision tool, not a surprise to discover at appraisal.
What the Network’s Programs Look Like
Most files on a two-unit condo land at 75%-80% LTV on a purchase, which means 20%-25% down. Select high-leverage programs reach 85% LTV on a purchase with roughly a 700+ score. Cash-out refinances top out around 75% LTV across most of the network, with about 6 months of seasoning commonly expected. These apply to long-term rental collateral.
Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures.
Reserves vary by lender, leverage, loan size, and transaction type. Around 6 months of PITIA is common. Conservative rate-term files at modest leverage under $1,500,000 can see reserves waived, and larger loans typically step up to about 9 months.
On coverage, 1.00 is where many select programs start. Stronger ratios open better pricing and leverage. A larger down payment lowers the payment and can lift the ratio, but it never erases leverage caps, credit floors, reserve rules, or property eligibility. Strong files clear both tests: enough equity and enough rental coverage. Clearing 1.00 also isn’t positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation. All of this is subject to lender guidelines and individual underwriting. This is not a commitment to lend.
For comparison, the STR program set is different: purchase to 75% LTV, refinance around 70%, cash-out 70%, a 640+ score, and about 12 months of hosting history. That is the track an investor leaves behind by converting. If the unit still operates as an STR at the time of the loan, those terms apply. If it has converted, the long-term terms above apply. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Where the General Rule Breaks
Refinancing a freshly converted unit. A refinance is a new loan that pays off the old one. It does not convert the existing loan. If the unit was just converted, the file is a newly leased or vacant scenario, and the old STR income is not the qualifying figure. Investors who expect the loan to be sized on prior STR revenue get a smaller loan than they planned.
Mid-term rentals. Some investors convert to furnished 30-90 day stays. The lender’s lease and market-rent test still applies, and the rent schedule still needs monthly comparables. Treatment varies by program, so raise it with the broker before the unit is listed that way.
Blocked STR use. When an association or city blocks STR, moving to 30+ day tenancies is the standard fallback, and those qualify as long-term rental files.
One unit converted, one still STR. On a two-unit building, the converted unit runs on lease or market rent. The other unit’s treatment depends on how it is operating at application. Mixed-use files draw more questions, and the cleanest ones have both units on the same basis.
Investor concentration. One more leased or formerly STR unit can tip a building toward non-warrantable status. That doesn’t end the file, but it can lower leverage.
Prepayment penalty. Many DSCR loans carry one, often with a step-down structure. Read it before converting, since a refinance later may trigger it.
Vesting. Individual or LLC title is handled the same way, subject to program terms, but vesting has to match across deed, application, and insurance. Mismatches pend files for weeks of back-and-forth.
Ineligible property types. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, whatever the unit count.
When the Long-Term Number Comes Up Short
Picture an investor whose condo ran well on STR income but whose appraiser’s market rent leaves coverage under 1.00. The options are a larger down payment, which lowers the payment; an interest-only period or extended term, available through select lenders in the network; or a sub-1.00 program through select lenders, with leverage and terms adjusted. A different property is the fourth option. Which one fits depends on credit, reserves, and how much cash the investor wants to keep in the deal.
The mistake is the reverse: pricing the loan off the Airbnb income, then discovering at appraisal that the lender sees only the monthly rent. A broker quote built on an assumed rent can drop below break-even once the rent schedule comes back lower. Run the break-even rent against PITIA before the appraisal is ordered.
Honestly, this is a close call for many owners. The STR income may be higher, but the long-term file carries less local-rule exposure, no expense haircut, and simpler documents. Whether that trade is worth a smaller loan is a call the numbers answer.
Documents to Gather
- Executed lease or leases, plus first month’s rent and deposit proof if newly leased
- Rent roll for a two-unit building: unit, tenant, rent, lease end date
- Condo documents and the completed questionnaire
- Insurance moved from STR coverage to landlord coverage, with vesting matching the deed
- Entity documents if title is in an LLC, subject to lender program eligibility
- Evidence the old listings are cancelled or expired, so the file reads as one use
Clean documents don’t guarantee approval. They leave fewer preventable gaps for the lender to question.
Cash-out on a converted two-unit property raises its own appraisal issues, covered in Lendmire’s piece How to Protect a Two to Four Unit Cash-Out From a Low Appraisal. Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
Will the lender count my past Airbnb income after I convert?
No. Once the unit is leased monthly or longer, the qualifying figure is the lease or the appraiser’s market rent. Fannie Mae’s appraiser guidance says nightly rates can’t be turned into market rent on the rent schedule form, and that carries into DSCR appraisals.
Does a lease above market rent raise my coverage ratio?
Not on most programs. They use the lower of the in-place lease and market rent, so an above-market lease is capped at the appraiser’s figure.
Can I convert a vacant unit and still get financed?
A vacant unit can go on market rent alone. Coverage may drop because no lease is documented, and leverage or terms may adjust. Subject to lender guidelines.
Does a non-warrantable condo project rule out a DSCR loan?
No. Many programs in the network finance them, though leverage and loan size are often capped. The condo questionnaire settles the project’s status, so request it early.
Which appraisal form applies to a two-unit condo?
One condo unit uses the single-unit rent schedule form. A two-unit building under condo ownership uses the 2-4 unit income report, with rent supported per unit.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals.
Investors focused on short-term rentals can review DSCR loans for Airbnb and short-term rentals.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Appraiser Update, June 2024
2. McKissock Learning: Form 1007 and short-term rental appraisals
3. Class Valuation: Why Form 1007 can’t be used for short-term rentals
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify for a DSCR Loan in Florida · How to Qualify for a DSCR Loan in Virginia · Projected STR Income vs Rental History for a DSCR Loan Qualification
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.