The Quick Read: On a vacant short-term rental purchase, most files qualify on the appraiser’s long-term market-rent opinion, which this article calls the STR1007 route. A signed lease usually adds paperwork without adding income, because the lender generally credits the lower of the lease or the market rent. The STR1007 route fits buyers who plan to run the property as a short-term rental from day one. A lease in place fits buyers who are fine with long-term tenancy, at least for a while.
- STR1007 means the appraiser’s monthly market-rent opinion, not nightly short-term-rental income, sets the income side of the ratio.
- A lease in place needs a tenant, a deposit, and proof the tenancy started. It generally cannot raise income above market rent.
- A long-term lease can conflict with the plan to host guests.
- Clearing 1.00 coverage is not the same as positive cash flow. Repairs, vacancy, management, and utilities sit outside the ratio.
- 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.
Neither option measures what a good short-term rental actually earns.
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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.
Side-by-Side
Here is how the two paths compare on structure. The STR1007 column reflects how the appraisal route typically works.
| Factor | STR1007 (no lease) | Lease in place |
|---|---|---|
| Review basis | Appraiser’s market-rent opinion | Signed lease, usually capped at market rent |
| Documentation | Appraisal with rent schedule | Lease, deposit, proof of rent received |
| Appraisal form | 1007 (one unit), 1025 (2-4 units) | Same form still ordered |
| Tenant before closing | Not needed | Required |
| Fit with STR plan | Direct, if local rules allow | Conflicts unless the plan changes |
| Income above market rent | None counted | None counted |
| Entity vesting | LLC possible, per program terms | LLC possible, per program terms |
| Reserves | Commonly around 6 months of PITIA | Commonly around 6 months of PITIA |
Property types follow the same rules on both paths. Manufactured homes, log homes, and barndominiums are not offered through the network’s DSCR programs. Reserves vary by lender, leverage, loan size, and transaction type. PITIA is principal, interest, taxes, insurance, and any association dues.
Entity vesting works the same on both paths. Title can often sit in an LLC, subject to lender program eligibility.
Key Terms Defined
DSCR is the debt service coverage ratio. You divide the property’s qualifying monthly rent by its monthly PITIA. A result of 1.00 means rent equals the payment.
Form 1007 is the Single-Family Comparable Rent Schedule. An appraiser uses it to estimate monthly market rent from three comparable long-term rentals. Form 1025 does the same job for 2-4 unit properties.
STR1007 is this article’s shorthand for qualifying a vacant short-term rental on that long-term market-rent figure.
Lease in place is a signed long-term lease with a tenant already paying rent when the loan closes.
Hosting history is a record of running short-term rentals, usually your own record as an operator. Programs often look for about 12 months of landlord or host experience.
How the Lender Picks the Income Number
On a vacant property, there is no lease to read. The appraiser’s rent schedule steps in. The lender orders the appraisal, and the appraiser picks comparable rentals and adjusts for differences. The standard form instructions say adjustments should reflect only significant differences. The form ends in one monthly market-rent conclusion.
That figure becomes the top of the ratio. BiggerPockets walks through the same math: rent used for lender review divided by the monthly obligation.
Here is the catch for STR buyers. The form is built for monthly leases. McKissock Learning reports that appraisers cannot multiply a nightly rate by 30 and call it market rent. The same source says the lender, not the appraiser, decides how income gets treated.
HousingWire argues that the form assumes stable occupancy and lease income, so leaning on it gives conservative coverage numbers for a short-term rental. That matches what a broker sees on files. A strong STR can look thin on a long-term rent schedule.
A third path exists. Some programs look at trailing twelve-month income when a property has a booking history. Others consider projected income from market-data services when it does not. BiggerPockets notes that only a small share of lenders accept projections. So ask early which income figure your lender will use. Lendmire’s network includes programs that read files differently, and a broker’s job is matching the property to the right one.
When STR1007 Is the Better Fit
STR1007 is the better fit when you want to host guests from the first week. You skip the tenant, the deposit, and the lease-up. You also keep the property available for your furnishing and listing plan.
It suits these buyers:
- The hands-on host. You plan to furnish the property and list it right away. A long-term tenant would get in the way.
- The buyer with strong coverage on market rent. If long-term rent already covers the payment with room to spare, you do not need STR income to carry the file.
- The investor buying a rent-ready property. If the home is already set up for guests, an appraisal-based file keeps the paperwork light.
- The experienced operator. Programs for short-term rentals usually expect about 12 months of landlord or host experience, and you already have it.
The tradeoff is that you take whatever the appraiser’s comps say. If long-term rent in the area is soft, the ratio will look soft too, even when nightly demand is strong.
Leverage matters here too. On a short-term-rental purchase, programs in the network go up to 75% LTV on the strongest files. LTV is the loan amount divided by the property value. Expect a credit score of 640 or higher. Coverage typically starts at 1.00 on a purchase. All of this is subject to lender guidelines, and every file is reviewed individually.
When a Lease in Place Is the Better Fit
A lease in place is the better fit when the property will not run as a short-term rental right away. That might mean a seller’s tenant is already there. It might mean you plan to rent long-term for a year before switching.
Consider the lease route in these situations:
- A seller’s tenant is staying. Inherit the lease and the paperwork is mostly done.
- You want a documented rent stream. A signed lease with proof of payment is concrete evidence for the file.
- The appraisal rent looks low. A lease at or below market rent will not fix that, but it can show the property is actually renting.
- You are delaying the STR launch. Perhaps you are waiting on renovations, permits, or an HOA decision.
Three cautions apply. First, a lease above market rent generally does not help. Most programs credit the lower of the lease or the market rent. Second, the file needs proof the tenancy started. For contrast, an agency announcement, Fannie Mae SEL-2023-09, requires lease support through the appraisal rent schedule or proof of two months’ rent received. DSCR lenders set their own standards, but the agency rule shows the logic. Third, month-to-month, expired, and related-party leases often fall back to market rent.
The biggest caution is strategic. Signing a long-term lease just to change the number rarely works. It adds a tenant you may have to wait out, and it pushes you away from the short-term plan you bought for. For more on how these two income bases compare, Lendmire’s piece STR1007 vs Lease Income on a DSCR Purchase for Airbnb Investors covers the mechanics from another angle.
A Worked Example
Run the numbers on a hypothetical vacant property. These are modeled assumptions, not market data.
Say the appraiser’s long-term market rent produces coverage of about 0.95x on the full monthly obligation. Under STR1007, that is the number. It sits just under the 1.00 benchmark that select programs use as a starting point.
Now say a buyer signs a lease at a higher rent than the appraiser found. Coverage still reads about 0.95x, because the market rent caps it. Say the lease comes in lower. Coverage drops below 0.95x, since the lower figure wins.
Now say the owner’s short-term plan, built on a trailing history or a market-data projection, supports coverage around 1.2x after expense adjustments. BiggerPockets describes a typical expense reduction of roughly 20-25% to gross STR income as common practice, not a fixed rule. If the lender accepts that income, the same property clears 1.00 comfortably.
| Income basis | Illustrative coverage | Read |
|---|---|---|
| Appraiser market rent | About 0.95x | Slightly under 1.00 |
| Lease above market | About 0.95x | Capped at market |
| Lease below market | Under 0.95x | Lower figure wins |
| Accepted STR income | About 1.2x | Clears 1.00 |
The lesson is simple. The same property can produce different results depending on which income the program accepts. That is why you should model both numbers before you make an offer.
What If the Number Comes In Low?
A low appraisal rent is fixable more often than buyers expect. Work down this list:
1. Ask for a review. If the comps look mismatched, your lender can pass a rebuttal to the appraiser with better comparables.
2. Add cash down. A larger down payment lowers the monthly payment and can lift the ratio. It never erases leverage caps, credit floors, or reserve rules.
3. Restructure the loan. Interest-only periods and extended terms are available through select lenders in the network. These can reduce the monthly obligation.
4. Look at a below-1.00 path. 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
5. Use STR income. If a program accepts trailing or projected STR income, the property may be reviewed on that basis.
6. Renegotiate the price. A lower price lowers the loan and the payment, which lifts the ratio.
The strongest files clear two tests: enough equity and enough rental coverage. Fixing only one rarely works. Qualification stays subject to lender guidelines, credit approval, and property review.
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.
Before You Make an Offer
Settle these questions before your due diligence window closes:
- Confirm local rules. A coverage figure does not make the use legal.
- Run both ratios. Model coverage on the supported long-term rent and on the STR projection.
- Ask which income the lender will count. Do this before the appraisal is ordered.
- Check your own profile. Programs commonly expect a 640 or higher score and about 12 months of host experience.
- Plan reserves. Cash reserves are commonly around 6 months of PITIA, but vary by lender, leverage, and loan size.
- Check eligibility. Loans go up to $3,000,000 on standard programs. Manufactured homes, log homes, and barndominiums are not offered.
- Plan furnishing and insurance. Know when the property will be ready to list.
After Closing
Closing vacant is not the end of the file. If you bought on the appraiser’s rent, you now build a booking record. That history can matter when you refinance later.
On a short-term rental, refinance leverage runs up to about 70% LTV. Cash-out is also up to 70% LTV on short-term-rental collateral, compared with up to 75% on standard long-term rentals. Coverage on a refinance also typically starts at 1.00.
If you took the lease route, you will need a plan to move from tenant to guests. Check the lease term and your plan for the end of the tenancy. Tax treatment can depend on how the funds are used and how the property is held. Investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
For the broader picture of how these appraisals get ordered, see Lendmire’s article Vacant on 1007 vs Leased at Closing for a DSCR Purchase. The complete DSCR loans guide covers qualification from the ground up.
The Verdict
Pick STR1007 if your plan is to host guests and long-term rent already supports the loan. Pick a lease in place if a tenant is already there or you will rent long-term first.
Do not sign a lease only to move the number. It rarely raises income, and it can undercut the short-term plan. If the appraisal number is tight and your STR projection is strong, the better move is to ask about programs that consider STR income, adjust the down payment, or restructure the loan.
This is a close call on paper and a clear call in practice. Match the income basis to how you will actually operate the property.
Frequently Asked Questions
Can I get a DSCR loan on a vacant short-term rental?
Often yes, subject to lender guidelines. With no lease, the appraiser’s market-rent opinion generally fills the income side of the ratio. Programs for short-term rentals typically want a 640 or higher score and about 12 months of host experience.
Does the 1007 measure my Airbnb income?
No. The form estimates monthly long-term market rent. McKissock reports that nightly income cannot simply be multiplied by 30 and placed on it. Strong short-term demand may not show up on that form.
Will a lease above market rent raise my ratio?
Generally not. Most programs credit the lower of the lease or the market rent, so the market figure caps the benefit. A lease below market can pull coverage down.
What does 1.00 coverage mean for my cash flow?
Not much by itself. A 1.00 ratio means rent equals the payment. Repairs, vacancy, management, utilities, and capital costs sit outside the calculation, so clearing 1.00 is not the same as positive cash flow.
Do I need to show personal income to qualify?
A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. You still provide property, entity, credit, and appraisal documents.
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. As a broker, it arranges these loans through select lenders across 41 markets, including Washington, D.C. Programs change and every file is underwritten individually.
About Lendmire
Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.
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References
1. Fannie Mae form instructions (hosted copy)
4. HousingWire
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: STR Endorsement vs Commercial Policy for a DSCR Portfolio · How Much Down Payment a DSCR Loan Requires at Purchase · How to Bridge a New STR Build and Refinance Into a DSCR 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.