The Quick Read: To finance a San Juan Islands rental with a DSCR loan, you first confirm the property can legally operate as the rental you plan, then pick the income method the lender will use, then size the loan so rent covers the full monthly payment. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. On these islands, the county permit often decides which income counts.
- Short-term rental income counts only if the property can legally operate as one.
- Without a permit, the file generally underwrites on long-term market rent.
- Purchases typically land at 75%-80% LTV on an investment property. Short-term rental purchases top out at 75%.
- Reserves commonly run about 6 months of PITIA, stepping up to about 9 months above $1,500,000.
- Clearing a 1.00 coverage ratio does not mean the property cash flows.
Investors fall in love with island rentals on the strength of a nightly rate. Lenders do not underwrite nightly rates. They underwrite what the property can legally earn and what it costs to carry.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 29, 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.
What Does a DSCR Loan Measure?
A DSCR loan measures one thing: whether the property’s rent covers its monthly obligation. You take rent used for lender review and divide it by PITIA, which is principal, interest, taxes, insurance, and any HOA dues. A result of 1.00 means rent equals the payment. Higher means more cushion.
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. Your personal income and debt-to-income ratio are not the center of the file. For the full mechanics, see Lendmire’s complete DSCR loans guide.
Here is the catch for island buyers. The ratio is only as good as the rent figure you feed it, and on the San Juans that figure depends on a permit.
Why Does the Permit Come First?
The permit comes first because a lender can use short-term rental income only if the property can legally operate as a short-term rental. The county requires a vacation rental permit to rent a single-family home or accessory dwelling unit for short stays, as the county defines them. The county reviews online ads, and every ad must carry the permit or compliance number. The penalty for advertising or running an unpermitted rental is $2,300.
Permits are capped by island. The county lists 337 on San Juan Island, 211 on Orcas, 135 on Lopez, and 10 across the outer islands. Shaw and Waldron do not allow short-term vacation rentals at all. Eastsound Village Commercial is an exception to the permit requirement, though the vacation rental rules still apply.
With caps in place, an existing permit can be the main asset you are buying. Before you write an offer, confirm with the county that the permit is active and in compliance, and ask how transfer works on sale. Land use and shoreline designation also decide whether a rental is allowed and under what conditions. 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.
Private restrictions are a second gate. A county permit does not prove that the plat covenants or HOA allow nightly stays. Read the covenants yourself.
How Do Lenders Count Rental Income?
Lenders count rental income through one of three methods, and which one applies depends on the property and the program. Across the wholesale network Lendmire works with, you see all three.
| Method | How it works | When it applies |
|---|---|---|
| Documented history | About 12 months of platform income | Existing rentals with a track record |
| Market projection | Data-based estimate of STR revenue | Purchases with no history, program permitting |
| Long-term rent | Appraiser’s market rent | No permit, or STR not accepted |
The appraisal side matters. The 1007 rent schedule was built for long-term rent. Short-term analysis often arrives as a narrative addendum, and small multi-unit properties use the 1025 form. Some lenders also apply an expense haircut to gross short-term income before dividing by PITIA, since nightly stays cost more to run than leases.
Most programs we place files with expect a 640+ score for short-term rentals and about 12 months of hosting history. Leverage is lower too: purchases go to 75% LTV, refinances run around 70%, and cash-out refinances are held to 70% on short-term-rental collateral. Coverage floors are 1.00 on purchases and refinances. Some lenders do not touch short-term rentals at all, so program fit matters before you shop price. Everything here is subject to lender guidelines and individual underwriting.
What If the Property Has No Permit?
If the property has no permit, the file underwrites on long-term rent from the 1007. The loan can still work. The strategy may not.
Picture a Lopez Island house bought on an Airbnb pitch with no transferable permit. The lender uses the appraiser’s long-term rent. If that rent is far below the nightly-income story, coverage can land under 1.00. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted, so the loan may still be placed. The better question is whether you still want the property at long-term-rent income.
The same logic applies on Shaw and Waldron. Short-term income cannot be counted there, so any rental plan has to rest on long-term leases.
Scenarios at a Glance
| Situation | Income the lender can use | Next step |
|---|---|---|
| Active permit, 12 months of history | Documented STR income | Confirm transfer, gather statements |
| Active permit, vacant at purchase | Projection, if program allows | Confirm program accepts it |
| No permit | Long-term market rent | Underwrite the deal on lease income |
| Shaw or Waldron | Long-term market rent | Plan for leases only |
A Worked Example: Passing the Ratio, Not the Reality
Run the numbers on an Orcas Island home with an active permit and documented platform income. Assume a modeled purchase at 75% LTV on an investment property, with documented income that clears roughly 1.25x against PITIA. That is a clean file on paper. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Now stress it. Seasonal resort markets can swing widely, and the same property might show a strong peak-season ratio and a much thinner off-season one. A lender looking at a trailing twelve-month average sees one number. You live through twelve different months.
DSCR compares rent to PITIA only. Clearing 1.00 is not positive cash flow. Repairs, vacancy, management, utilities, cleaning, and capex sit outside the calculation. On an island, those costs run heavier. The county’s own housing fact sheet notes that the islands are ferry-dependent and that construction and utility costs rise when workers and materials arrive by ferry or barge. Treat ferry reliability as an occupancy and seasonality risk, not just an inconvenience.
What Goes Into PITIA on an Island?
PITIA on the islands can run heavy, and the insurance line deserves special attention. Washington law requires a short-term rental operator to carry primary liability insurance of not less than one million dollars in the aggregate, or book through a platform that provides equal or greater coverage. The lender’s insurance review feeds directly into the denominator.
The state also sets operator duties. Under chapter 64.37 RCW, operators must give guests contact information during their stay, post safety information, and remit applicable taxes unless the platform does so for them. Budget for these as operating costs. Taxes, insurance, and any private-road or HOA fees all land in the ratio, so get real quotes early. Tax treatment varies; consult a qualified professional.
How Much Do You Need to Put In?
Most purchases on an investment property land at 75%-80% LTV, which means roughly 20%-25% down. Select high-leverage programs reach 85% LTV with a score around 700 or better, though short-term rental purchases stay capped at 75%. Credit floors start at 620 in parts of the network. Most programs want around 660, and 700+ unlocks the strongest leverage tiers.
Reserves vary by lender, leverage, loan size, and transaction type. About 6 months of PITIA is common, and loans above $1,500,000 typically step up to about 9 months. Standard programs cover roughly $100,000 up to $3,000,000. Above $2,500,000, the network generally holds to 30-year fixed structures.
A larger down payment lowers the monthly payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Appraisal matters here too. LTV runs off appraised value, not contract price, and islands have thin comparable sales. A low appraisal means more cash to close. Plan for that before you go under contract.
Which property types are eligible? Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, so that cabin on acreage may be a non-starter.
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.
Structure Choices
The spine is the 30-year fixed. Select lenders in the network also offer extended terms such as 40-year and interest-only periods, and ARM structures exist for investors who want them. Interest-only can help coverage on a tight island file, though it changes the loan’s long-term profile.
For a larger or more complex holding, Lendmire’s piece Can a Traditional Jumbo Loan Finance a $3M Rental Property? covers the other side of that decision.
Your Document Checklist
- Permit number and county compliance status.
- Covenants or plat restrictions for the property.
- Platform statements for the trailing 12 months, if the property operates now.
- Insurance quote that satisfies the state liability minimum.
- Entity paperwork if you buy in an LLC, subject to program terms.
- Appraisal with rent schedule and any short-term addendum.
- Proof of reserves.
Refinancing an Existing Island Rental
Existing owners can refinance, and the same permit logic applies. Cash-out refinances top out around 75% LTV on standard rentals, with about 6 months of seasoning as the common expectation. On short-term-rental collateral the cash-out ceiling is 70%. If your income history sits on documented bookings, gather the statements first. The cash-out refinance page explains the full path. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Key Terms Defined
DSCR: The debt service coverage ratio, which divides rent used for lender review by the full monthly payment.
PITIA: Principal, interest, taxes, insurance, and association dues, the monthly obligation in the ratio’s denominator.
LTV: Loan-to-value, the loan amount as a percentage of appraised value.
1007: The appraisal form that estimates long-term market rent on a single-unit property.
1025: The appraisal form for small multi-unit properties.
Seasoning: The waiting period a lender wants after you buy before you pull cash out.
Frequently Asked Questions
Can I qualify using projected Airbnb income?
Sometimes. Some programs accept a market-data projection on a permitted property, while others want about 12 months of documented history. If the property has no permit, projected nightly income cannot be used.
What if the home has no permit?
The file underwrites on long-term rent from the appraiser. If coverage lands under 1.00, select lenders in the network offer paths with leverage and terms adjusted. Decide first whether the investment still works on lease income.
Does clearing the ratio mean the rental will cash flow?
No. DSCR measures rent against PITIA only. Vacancy, management, cleaning, repairs, and utilities sit outside it, and they cost more on ferry-served islands.
Do I have to tell the lender about rental use?
Yes. The loan is a business-purpose investor loan on a non-owner-occupied property, and the lender needs the true plan for the income method and appraisal.
Which islands are off the table for short-term rentals?
Shaw and Waldron do not allow short-term vacation rentals, per the county. The outer islands share a small pool of permits, so availability is tight.
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. The brokerage arranges DSCR investor loans through select lenders across 41 markets, including Washington, D.C. Nothing here is a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a DSCR Loan on a Surfside Beach Rental? · Can You Get a No-Ratio DSCR Loan on a 2-4 Unit Rental? · Can a W-2 Employee Get a DSCR Loan on a Rental?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.