The Quick Read: Usually 20% to 25% down on an investment-property purchase, with short-term-rental collateral topping out at 75% LTV (so at least 25% down), plus about 6 months of PITIA in documented reserves, and both numbers can move up for condotels and cabins. Programs vary by lender, leverage, loan size, and property type, and every file is underwritten individually.
- Most investment-property purchases land at 75%-80% LTV. That means 20%-25% down. Select high-leverage programs reach 85% LTV with roughly a 700+ score.
- Short-term-rental purchases cap at 75% LTV. Expect a 640+ score and about 12 months of hosting history.
- Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Some conservative rate-and-term files at modest leverage can see reserves waived.
- Down payment, closing costs, and reserves are three separate pots of cash.
- Log homes, manufactured homes, and barndominiums are not offered, so some cabins are out before the money question starts.
What Is the Short Answer on Cash Needed?
Plan on three buckets of cash: the down payment, closing costs and prepaids, and reserves left in the bank after closing. A condotel or cabin buyer should expect to sit at the heavier end of each bucket.
DSCR Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
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Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. 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.
Here is how the wholesale network looks from the broker’s chair. A plain long-term rental purchase usually runs 75%-80% LTV. A short-term-rental purchase tops out at 75% LTV. A cabin that rents by the night is a short-term rental. So the buyer usually brings 25% down, not 20%.
DSCR means debt service coverage ratio. It compares the property’s rent used for lender review to the full monthly obligation. The generic math is on Wikipedia’s debt service coverage ratio page. On a rental loan, the payment side is PITIA: principal, interest, taxes, insurance, and association dues. For the complete picture of how these loans work, see Lendmire’s complete DSCR loans guide.
One more point. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
Key Terms Defined
LTV (loan-to-value): the loan amount divided by the property value. Down payment is what remains: 100% minus the LTV.
PITIA: principal, interest, taxes, insurance, and association dues, the full monthly obligation used in the coverage ratio.
Reserves: documented liquid funds that remain after closing, usually counted in months of PITIA.
Condotel: a condo unit in a hotel-style building, often with a front desk, an operator, and sometimes a mandatory rental pool.
Non-warrantable: a financing label for a condo project that falls outside agency rules. It does not mean the unit is defective.
Seasoning of funds: the length of time money sits in an account before it counts as the borrower’s own.
How Much Down Does a Condotel Buyer Need?
Condotel buyers should expect to bring at least the 25% that short-term-rental collateral calls for, and sometimes more. Whether a condotel project is offered at all comes first. Leverage comes second.
The lender looks at the building before it looks at the borrower’s bank balance. A condotel raises questions that an ordinary condo does not:
- Is a rental pool mandatory?
- Does an operator control which units are booked, and when?
- Does the project share revenue with the unit owner?
- Is the HOA in litigation, or are owners behind on dues?
Condotel eligibility is decided project by project through the select lender, and the answer can be no. Do not write an offer on the assumption that the project will be offered. Get the HOA documents and the rental program agreement in front of the broker before the contract goes firm.
If the project is offered, the down payment follows leverage. The 75% LTV cap on a short-term-rental purchase means 25% down at the best. Weaker credit, a thin coverage ratio, or a large loan can pull leverage lower, which pushes the down payment higher. A higher down payment lowers the monthly obligation and can lift the coverage ratio. It does not override a credit floor, a reserve rule, or a property-eligibility decision. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Coverage matters too. The 1.00 floor on a short-term-rental purchase is where select programs start, not a guarantee. Stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. AirDNA’s DSCR explainer notes that lenders look harder at short-term-rental income, and that holds up on real files.
Lendmire’s piece How Much More Down a Cabin or Condotel STR Needs on DSCR covers the leverage side in more depth.
What About Cabin Buyers?
A cabin is a property-type question first and a rental question second. Frame-built cabins with year-round access can work. Log homes, manufactured homes (single- and double-wide), and barndominiums are not offered in the network’s DSCR programs. That is a plain no. It is not a harder yes.
For cabins that are eligible, three issues drive the cash requirement:
1. Short-term-rental treatment. A cabin that rents nightly is underwritten as a short-term rental: 75% LTV on a purchase, so 25% down at minimum. Hosting history means platform payouts or manager statements.
2. Rural location. Some lenders trim leverage on rural collateral. That means a bigger down payment for the same price.
3. Income that swings with the season. Underwriting looks at a full twelve months. A slow winter counts against a strong summer. The coverage ratio is built on the year, not the peak. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
A first-time host buying a cabin with no history is a real case. The file can lean on an appraiser’s market-rent estimate or a third-party projection. Lenders weigh that differently from actual bookings, which is another reason to assume the conservative end of leverage.
Short-term rental rules can vary by city, county, HOA, and property type. Investors should confirm local rules before relying on projected rental income.
Condotel vs. Cabin: Side by Side
| Factor | Condotel | Cabin |
|---|---|---|
| Eligibility gate | Project review, rental pool, operator | Construction type, access, rural status |
| Purchase leverage | Short-term-rental cap of 75% LTV | Short-term-rental cap of 75% LTV |
| Income evidence | Pool statements, platform payouts | Platform payouts or appraiser estimate |
| Dues in PITIA | Often high, raises reserve amount | Usually lower or none |
| Main decline risk | Project terms, HOA health | Property type, thin rent evidence |
The leverage cap is the same on purpose. The risks that tighten the file are different.
How Do Reserves Work?
Reserves are documented liquid funds left after closing, and they are separate from the down payment. Across most programs in the network, the common expectation is about 6 months of PITIA. The count varies by lender, leverage, loan size, and transaction type.
Here is how that moves:
- Conservative files: a rate-and-term refinance at modest leverage and under $1,500,000 can see reserves waived.
- Mid-range files: about 6 months of PITIA is the typical ask.
- Larger loans: above $1,500,000, programs typically step up to about 9 months.
Say it flexibly with a client. No single number is universal.
For a condotel, the PITIA line includes association dues. High resort or hotel-style dues raise the monthly figure, so the same month count means more dollars in the bank. Reserves for a condotel with heavy dues can feel like double the burden of a cabin with the same loan size. That is the math, not a penalty.
Why do lenders want reserves on these properties? Short-term income swings. A cabin in a slow season or a condotel in a soft stretch still carries a full payment. Reserves show the borrower can ride it out.
What counts as reserves?
Checking, savings, and brokerage balances are the usual sources, verified with statements. Funds should be seasoned, meaning they have sat in the account long enough to count as the borrower’s own. Large recent deposits get questions. Expect to source them.
One practical note. In some programs, cash-out proceeds from another property can count toward reserves. Check this against the specific program before relying on it.
Per property or per portfolio?
Reserves are generally counted for the subject property. A borrower with several financed properties may face added scrutiny. For contrast, the Fannie Mae Selling Guide adds reserve requirements for borrowers with multiple financed properties. DSCR programs set their own rules. The practical advice is the same either way: show liquidity beyond the single deal.
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.
What Does Total Cash Look Like?
The total cash need is the down payment plus closing costs and prepaids plus post-closing reserves. Run it as percentages and months, then let the calculator convert to dollars.
Take a condotel at a short-term-rental purchase cap of 75% LTV. The buyer brings 25% down. Closing costs and prepaids come on top. Then about 6 months of PITIA sit in the bank, with association dues counted in. If the loan runs above $1,500,000, the reserve ask typically steps up to about 9 months.
Take a cabin at the same 75% LTV. The down payment is the same 25%. Reserves run about 6 months of a payment that usually carries lower dues.
Underestimating the total is the common last-minute failure. The buyer budgets for the down payment and forgets that reserves must still be in the account at closing. A loan officer cannot count the down payment twice.
Can a Bigger Down Payment Fix a Weak File?
No. A bigger down payment helps, but it does not fix everything. It lowers the monthly payment and can lift the coverage ratio. It does not erase leverage caps, credit floors, reserve rules, or property eligibility.
The strongest files clear both tests: enough equity and enough rental coverage. A buyer putting 35% down on a log cabin still has an ineligible property. A buyer with a 640 score and no hosting history still has a thin short-term-rental file. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Credit matters too. A 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers. For high-leverage purchases, the score is part of the gate.
What about no-down-payment ideas?
There is no zero-down DSCR program.
Clearing 1.00 is also not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it. A condotel can clear the ratio and still lose money after the operator’s fees.
Mistakes That Pend These Files
- Assuming condotel eligibility. Get the project reviewed first.
- Counting the down payment toward reserves. They are separate pots.
- Stale or thin hosting history. Twelve months of platform payouts is the usual expectation for a short-term-rental purchase.
- Ignoring dues. Association dues sit inside PITIA and raise the reserve amount.
- Skipping the HOA questionnaire. Incomplete project documents stall condo and condotel files more than almost any other item.
- Unseasoned deposits. Large recent transfers need a paper trail.
- Entity paperwork. If an LLC takes title, the documents must be in order, subject to lender program eligibility.
Documents to gather early: two months of bank statements, the purchase contract, the appraisal with a market-rent schedule, the HOA or condo questionnaire, hosting history, and entity documents. For rental appraisals, lenders typically use the 1007 rent schedule on a single-family property and the 1025 on 2-4 units.
A resale note: a condotel or non-warrantable unit can shrink the pool of buyers at exit. That affects the equity the down payment is buying.
Is a Second-Home Loan a Better Fit for a Cabin?
Only for a cabin that is mostly personal. Second-home loans can ask for less down. They also limit how much the property can be rented. For a true short-term-rental business, that limit is a problem, and DSCR is the right frame. The Fannie Mae occupancy type rules describe how agency lending separates a second home from an investment property, and the line matters for rental use.
Frequently Asked Questions
Is 25% down enough for a condotel DSCR purchase?
It is the starting point on short-term-rental collateral, since purchase leverage tops out at 75% LTV. It may not be enough if the project is offered with tighter terms, or if credit and coverage are thin. Project eligibility comes first, and a lender decides it file by file. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Do reserves count toward the down payment, or the reverse?
No. They are separate. The down payment goes to the seller at closing. Reserves are funds still on deposit afterward, usually about 6 months of PITIA, and documented with statements.
Does a log cabin qualify for a DSCR loan?
No. Log homes, manufactured homes, and barndominiums are not offered in the network’s DSCR programs. A frame-built cabin with year-round access is reviewed on its own merits, including rural status and short-term-rental history.
Does a bigger down payment waive the reserve requirement?
Not by itself. More equity can lift the coverage ratio and improve terms. Some conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, but a larger down payment on a purchase does not erase the rule. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
What happens if my coverage ratio is below 1.00?
That is a different path, not a lower floor on the same program. Select lenders in the network will review coverage below 1.00, with leverage and terms adjusted. Expect lower leverage and more cash from the borrower.
Next Step
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. Qualification is subject to lender guidelines, and nothing here is a commitment to lend. Reach the team at 828-256-2183 or request a quote.
Resort and rural buyers should treat reserves as part of the purchase price, not an afterthought, because the property that draws the most summer demand is also the one that leans hardest on cash in the slow months.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Wikipedia – Debt service coverage ratio
2. AirDNA – Debt Service Coverage Ratio for Real Estate
3. Fannie Mae Selling Guide B2-2-03: Multiple Financed Properties Same Borrower
4. Fannie Mae Selling Guide B2-1.1-01: Occupancy Types
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a DSCR Loan Be Used for a Commercial Property or Business? · How a Luxury Rental DSCR Loan Works in Dallas · Emerging Cabin Markets vs Established Resorts on a DSCR STR Loan
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.