What Is Projected Rental Income On An Appraisal — The Quick Read: Projected rental income is the appraiser’s own opinion of market rent. Appraisers use it when a property has no signed lease and no reliable rent history. It comes from a specific exhibit attached to the appraisal. The borrower or investor does not supply this number. On a single-unit rental, it comes from Form 1007. On a two-to-four unit property, it comes from Form 1025. Lenders — including most DSCR programs — treat this appraiser-derived number as the anchor for qualifying rental income. Sometimes they use it alongside a lease. Sometimes they use it instead of one.
Key Terms Defined
Projected rental income — This is the appraiser’s opinion of the monthly market rent a property could earn. It’s based on comparable rental data, not a lease.
Form 1007 (Single-Family Comparable Rent Schedule) — Appraisers use this exhibit on one-unit investment properties. It documents how the appraiser arrived at a supported market-rent figure.
Form 1025 (Small Residential Income Property Appraisal) — Appraisers use this exhibit on two-to-four unit properties. It looks at both market rent and the property’s overall value using rental comparables.
Comparable rental analysis — This is the appraiser’s process. They find similar rented units. They adjust for differences in size, location, condition, and lease terms. Then they land on one supported rent conclusion.
Rent schedule — This is the section of the appraisal report where two numbers sit side by side: the property’s current actual rent (if it has one) and the appraiser’s estimated market rent.
DSCR (debt service coverage ratio) — This ratio compares the property’s monthly rent to its full monthly obligation. That obligation includes principal, interest, taxes, insurance, and HOA dues where they apply. DSCR is a ratio, not a cash-flow figure.
Projected vs. Actual Rental Income
Actual rental income comes from a signed lease. It has a paper trail — bank deposits, a landlord ledger, and traditional personal-income documentation showing Schedule E history. Projected rental income works differently. It comes from the appraiser’s comparable-rent analysis. Lenders use it when no lease exists, or when a lease is new, below market, or hard to verify. Both numbers can show up on the same file. They don’t always match.
| Factor | Actual/Documented Rent | Projected/Market Rent |
|---|---|---|
| Source | Signed lease, deposits, traditional personal-income documentation | Appraiser’s comparable rental analysis |
| When used | Tenant already in place | No tenant yet, new purchase, unreliable lease |
| Form involved | Lease + income documentation | Form 1007 (1-unit) or Form 1025 (2-4 unit) |
| Documentation risk | Cash rent, below-market family leases | Weak or thin comparable rentals |
How Do Appraisers Actually Calculate It?
Appraisers pull at least three comparable rental properties. These properties need to share the subject’s physical structure, location, and lease terms. The appraiser adjusts each one for meaningful differences. Then they land on one supported monthly figure. This is the same logic used for comparable sales on value — just applied to rent instead of price. Fannie Mae describes Form 1007 as the standard exhibit an appraiser prepares for a single-family investment property. The point of the exhibit is simple: it gives the lender a supported market-rent figure. That way, the lender doesn’t have to rely on an unverified number from the borrower.
The comparables have to actually match the subject’s rental market. They can’t just be nearby sales that happened to be rented at some point. Picture an appraiser working a duplex near a stable employment corridor. That appraiser should pull rented duplexes and small multifamily units from that same submarket. Single-family comps from three miles away, with a different tenant profile, won’t cut it. This is why comparable selection is worth pushing back on if it looks thin. It’s the entire basis for the number that ends up driving the loan.
Which Appraisal Form Applies to Your Property?
The form depends entirely on unit count. Using the wrong one is a common source of confusion on investor files.
| Property Type | Form Used | What It Documents |
|---|---|---|
| 1-unit investment property | Form 1007 | Estimated market rent only |
| 2-4 unit property | Form 1025 | Market rent plus fair market value |
| Standard purchase appraisal (any property) | Form 1004 | Value only — no rent data at all |
Fannie Mae is clear on this point: Form 1007 is only required when a lender is actually using rental income to qualify a borrower, and only on a one-unit investment property. A standard Form 1004 purchase appraisal, by itself, says nothing about rent. Investors sometimes assume rent is already covered when it isn’t.
Why Doesn’t the Lender Count All the Rent?
Gross rent and the rent a lender actually counts are two different numbers — almost everywhere in the industry. The appraiser’s rent conclusion is a top-line figure. Lenders build in a cushion before they treat any of it as usable income. In the conventional world, Fannie Mae’s Selling Guide sets a clear rule. Lenders must multiply gross monthly rent from Form 1007 or Form 1025 by 75% before it counts toward qualifying income. This discount exists to cover vacancy, turnover, and maintenance. Those costs eat into gross rent in real life.
That specific 75% rule is agency-only. DSCR programs aren’t bound by the Fannie Mae Selling Guide. They don’t apply that exact haircut. But the underlying idea still holds up across the industry, just in different forms: gross appraised rent and usable rent aren’t automatically the same number. Investors comparing a DSCR quote against a conventional pre-approval should never assume both programs run the appraiser’s rent number through the same math.
A Worked Example (No Dollar Figures, Just the Logic)
Picture an investor buying a single-family rental. No tenant is in place yet. The purchase appraisal comes back with a Form 1007 rent schedule attached. The appraiser built it from three comparable rentals in the same submarket, adjusted for lot size and a one-bedroom difference, then reconciled to a single supported market-rent figure.
Most DSCR lenders will use that appraiser-derived rent to run the coverage ratio. That ratio is rent divided by the full monthly obligation, which includes principal, interest, taxes, insurance, and any HOA dues. Say the appraiser’s comparable set is strong and supports a rent that comfortably covers the property’s monthly obligation. Then the file lands solidly above a 1.00 coverage ratio, and the deal has room on both leverage and pricing. Now say the comparable set comes back thin — maybe the appraiser had to reach for rentals outside the immediate submarket, or made large downward adjustments. In that case, the resulting rent figure can land the file right at or just under a 1.00x ratio. That changes what leverage and terms are available. The number on the rent schedule is doing real work here. It’s not just filling a box.
How Does Loan Type Change the Rule?
Conventional lending, DSCR/non-QM, and FHA multi-unit financing all lean on an appraiser’s rent opinion. But each one applies a different test to it.
| Loan Type | How Projected Rent Is Used |
|---|---|
| Conventional | 75% of appraiser’s Form 1007/1025 rent counts as qualifying income |
| DSCR / Non-QM | Rent is compared directly against the property’s monthly obligation as a coverage ratio |
| FHA (3-4 unit) | Net rental income must equal or exceed the projected mortgage payment — the property must be self-sufficient |
The FHA rule is worth understanding, even for investors who’ll never touch an FHA loan. It shows how far back this logic goes. HUD’s own guidance sets a bar for three- and four-unit properties. Net rental income — defined as the appraiser’s estimate of fair market rent from all units — must equal or beat the projected monthly mortgage payment before the deal counts as viable at all. That’s a self-sufficiency test built entirely on the appraiser’s opinion. It existed decades before DSCR programs made the same rent-versus-payment comparison the whole basis of a loan.
DSCR loans are designed for non-owner-occupied investment properties. Because they’re business-purpose investor loans, lenders review them differently than a standard owner-occupied mortgage. Qualification runs mainly on whether the property’s rental income covers the payment, subject to lender guidelines, rather than on personal income documentation. For a fuller breakdown of how that qualification works end to end, Lendmire’s complete DSCR loans guide walks through the mechanics in more depth.
When Does Projected Rental Income Get Rejected?
Documentation problems sink projected income far more often than weak rent numbers do. Take a property that isn’t rent-ready — missing appliances, an unfinished unit, active code violations. An appraiser’s market rent figure can get discounted or flagged here, because comparable rents assume a habitable, market-standard unit. A below-market lease to a family member creates a different problem. If the appraiser’s market-rent opinion comes in meaningfully higher than the actual lease, most programs won’t simply swap in the higher number without support. Some will use the lower, documented figure instead. Cash rent with no deposit trail runs into a similar wall. An appraiser’s opinion can stand in for an unreliable lease. But it generally can’t stack on top of a lease that nobody can verify.
What Happens When the Lease and the Appraisal Disagree?
The lower of the two figures usually wins. Say there’s an existing lease and the appraiser’s market-rent opinion comes in below it. Most conventional guidance defaults to the appraiser’s figure. DSCR programs generally take the same conservative stance. The appraisal acts as a ceiling check, not just a floor. Now say there’s no lease at all. The appraiser’s number is the only figure in play. That’s exactly why comparable selection deserves scrutiny before a file gets submitted.
Short-Term Rentals Break the Form Entirely
This edge case trips up more investors than any other. Form 1007 was built for one job only: estimating long-term monthly market rent. It cannot support a short-term rental appraisal. An appraiser should never take a nightly Airbnb rate and multiply it by 30 to guess at monthly rent. That shortcut ignores personal property, business expenses, and the vacancy patterns unique to nightly rentals. When a lender still relies on Form 1007 for an STR property, the resulting rent figure often understates how the property actually performs. That’s not because the tool is conservative — it’s because the tool wasn’t built for nightly-rental income patterns.
Properly underwritten STR files rely on a different tool: a short-term-rental income analysis. Lenders report this as a clearly labeled narrative, not the standard rent schedule. Across select lenders in Lendmire’s wholesale network, STR purchases can run up to roughly 75% LTV. Refinance and cash-out top out closer to 70%. These deals are generally paired with a credit score around 700 or higher and about 12 months of hosting history. A 1.00 coverage ratio acts as a select-program floor on these files. Lenders evaluate purchase and refinance transactions against that floor separately, since the income evidence behind each one differs. Investors weighing whether platform income or long-term-lease comps drive their number should look at what counts as short-term rental income for a lender. On the revenue side specifically, gross booking revenue vs. qualifying rental income covers one of the more common points of confusion once a property’s income comes from a booking platform rather than a lease.
The Forms Themselves Are Changing
The Uniform Residential Appraisal Report is getting redesigned. Under the new version, the legacy Single-Family Comparable Rent Schedule stops existing as a separate exhibit. Estimating monthly market rent gets folded directly into the new report format. UAD 3.6 becomes mandatory for all new appraisal reports submitted to the GSEs’ collateral data portal starting November 2, 2026. This is a conventional-market change, not a DSCR one. Government loans, non-QM files, and jumbo loans using appraisals in the new format won’t be eligible for delivery to Fannie Mae or Freddie Mac. In practical terms, DSCR files will likely keep using legacy-style 1007/1025 rent-schedule exhibits well after conventional lending moves to the new report. The mechanics described here should stay relevant to non-QM investors regardless of that agency-side transition.
Where This Fits Into a DSCR File
Across the DSCR files Lendmire arranges through its wholesale network of investor lenders, the appraiser’s rent schedule is usually the single most important exhibit in the package. It often matters more than the credit score, and sometimes more than the leverage request. Most programs in the network want a coverage ratio at or above roughly 1.00 on purchases. That’s a floor for select programs, not a universal standard — and stronger ratios open better leverage and pricing tiers. Purchase leverage on most files lands in the 75%-80% LTV range. A handful of high-leverage programs reach 85% LTV for borrowers around a 700+ score. Cash-out refinances cap closer to 75% LTV, generally with around six months of seasoning expected before the payoff. Credit floors run as low as 620 in parts of the network, though most programs prefer something closer to 660. The strongest leverage tiers open up around 700 and above. Reserve requirements vary by lender, loan size, and leverage. They commonly land around six months of PITIA. Some conservative rate-term files under $1.5 million waive reserves entirely. Larger loan amounts can step reserves up toward nine months.
Coverage ratios below 1.00 aren’t automatically a dead end. Select lenders in the network will still work these files, with adjusted leverage and terms. That’s not the same thing as a no-ratio program, though — that’s a separate structure, available only through select lenders, and generally reserved for borrowers who already own a primary residence. Investors without traditional employment income who lean entirely on the property’s own rent picture should look at how that qualification actually runs in practice — qualifying for a rental property loan without traditional employment income walks through that path in more depth. For an investor pulling equity out of an existing rental based on an updated rent schedule rather than personal income, how DSCR refinancing works without income verification covers that mechanic directly.
Standard loan amounts across the network generally run up to $3,000,000. Anything above $2,500,000 typically routes to 30-year fixed structures. Smaller-balance files route through select lenders that specialize in that range. Lendmire, NMLS# 2371349, arranges these DSCR loans as a broker working with lenders across 40 markets, including Washington, D.C. Lendmire doesn’t fund or underwrite the loan itself. Every scenario gets reviewed by the lender against the borrower’s credit profile, the property, and program guidelines. None of the ranges above are a commitment to lend. Clearing a coverage ratio doesn’t guarantee approval — it’s one input a lender weighs alongside credit, reserves, and the property review.
Tax treatment of rental income, and any deductions tied to it, can depend on how the property is held and how funds are used. Investors should keep clean records and talk to a qualified tax professional before relying on any tax outcome.
If you’re buying or refinancing a rental property and want to see how the numbers actually work once an appraiser’s rent schedule is in hand, Lendmire can help compare DSCR loan options based on the property’s income, credit profile, leverage, and investor goals. Reach the team at 828-256-2183 or request a quote directly.
Frequently Asked Questions
Does projected rental income count if the property is currently vacant?
Yes — that’s exactly the scenario Form 1007 or Form 1025 exists for. When there’s no lease and no rent history, the appraiser’s comparable-rent analysis becomes the only income figure available. Most DSCR programs will use it directly rather than waiting for a tenant to sign.
Can I use projected rental income on a primary residence?
Generally not, in the way investors mean it for a rental purchase. Projected rental income exhibits like Form 1007 and Form 1025 are built for non-owner-occupied investment property analysis. A primary residence purchase or refinance runs on the borrower’s own income, not a rent schedule.
What if my actual lease is higher than the appraiser’s rent estimate?
The lower figure usually wins. Most lenders — conventional and DSCR alike — treat the appraisal as a check against an inflated lease. If the appraiser’s comparable-rent opinion comes in below a signed lease, expect the lower number to drive qualifying income, not the lease amount.
Does a short-term rental appraisal use the same rent schedule as a long-term rental?
No, and using the wrong one produces a misleading number. Form 1007 was built only for long-term monthly market rent. It can’t properly support a short-term rental analysis. STR income needs a separate, narrative-based income analysis instead of the standard rent schedule.
Is the 75% rental-income haircut a DSCR rule too?
No. That specific percentage is a conventional/agency mechanic from the Fannie Mae Selling Guide, and DSCR programs aren’t bound by it. DSCR files compare the appraiser’s rent figure directly against the property’s monthly obligation as a coverage ratio. That’s a different calculation entirely from the agency haircut.
Program availability, loan terms, and eligibility are subject to lender guidelines, credit approval, property review, and full underwriting. This article is educational and is not a loan offer or commitment to lend.
About Lendmire
Lendmire is a non-QM mortgage broker (NMLS# 2371349). It facilitates DSCR investor loans across 40 markets, including Washington, D.C. Lenders generally review DSCR eligibility around property-level rental income instead of personal income documentation, subject to lender guidelines. This makes DSCR loans a fit for LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. Lendmire is a two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
Lendmire’s Top Mortgage Workplace recognition is documented by Scotsman Guide 2025 Top Mortgage Workplace and Scotsman Guide 2026 Top Mortgage Workplace.
References
1. Fannie Mae — Form 1007, Single-Family Comparable Rent Schedule
2. Fannie Mae — Appraiser Update, June 2024
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.
