Whether you're looking to buy, refinance, or learn about financing an Airbnb property, understanding your financing options is crucial. Most lenders require at least 6-12 months of rental history to finance an Airbnb with a DSCR loan which of course, is a problem for most real estate investors. In this article we’ll go over how you can obtain a loan for your Airbnb project with the AirDNA projected cashflow of the property while obtaining a low interest rate.

‍Benefits of Using DSCR Loans for Airbnb Properties

‍Airbnb rentals can be a preferred rental strategy due to their potential to generate higher monthly cash flow compared to traditional long-term rentals. This flexibility allows vacation properties and other non-cash flowing long-term rentals to be listed on Airbnb, often achieving a Debt Service Coverage Ratio (DSCR) greater than 1.

For specialty Airbnb lenders such as Ridge Street Capital, a DSCR above 1 signifies the property's ability to cover its debt obligations and operational expenses solely through its rental income. This approach prioritizes the property's value and positive cash flow, rather than relying on the borrower's personal income, making DSCR loans the ideal choice for Airbnb investors.

How to Get a DSCR Loan For Your Airbnb

1. Use AirDNA to project monthly cashflow. Utilize AirDNA’s Net Operating Income (NOI) tool to project your Airbnb property's monthly income accurately.
2. ‍Check the DSCR. Calculate your property's Debt Service Coverage Ratio to ensure it has a DSCR greater than 1.0. The Debt Service Coverage Ratio (DSCR) is calculated by dividing the monthly rent of the property by the monthly loan payment (principal + Interest), taxes, insurance and association fees (PITIA).
   ‍DSCR = Rent/PITIA‍
   The basis of a DSCR loan, is that the rent you collect from tenants leasing the property should be greater than the cost to own and operate the property. Investment purpose rental properties with a DSCR greater than 1.0 are called “cash flowing”. You can calculate the DSCR of your rental property with our DSCR Loan Calculator.
3. ‍ Complete the Short Credit Qualification Checklist
   1. Credit Score Above 660?
   2. No Bankruptcy in the last 5 years?
   3. LLC, Corporation, or Partnership in good standing?
4. ‍ Get a Term Sheet From Ridge Street. Getting DSCR loan terms for your Airbnb is simple with Ridge Street. Whether you have a property already or you’re simply scoping a project, we’ll provide you with industry leading terms.
   ‍Request a Term Sheet

‍Why Ridge Street is the #1 Airbnb Lender

Ridge Street Capital Vs. Conventional Lenders

• Debt-to-income Ratio: Not used in loan qualification by Ridge Street (Conventional lenders often require DTI ratio)
• Tax Returns: Not required (Conventional lenders typically require personal and business tax returns)
• Entity Structure: Allows borrowing under LLCs (Conventional lenders may require personal guarantees)
• Property Limits: No concentration limits on number of properties financed (Conventional lenders often restrict to 10 properties)
• Underwriting Flexibility: Properties with a DSCR greater than 1.0 qualify based on property income potential using AirDNA projections (Conventional lenders rely heavily on personal income and strict underwriting rules)

‍Ridge Street Capital Vs. Other DSCR Lenders

• Use of AirDNA Projections: Ridge Street qualifies loans based on projected Airbnb income using(Other DSCR lenders underwrite based on long-term rental income only)
• Cash-Out Refinance: Cash out your property before it is even rented (Other DSCR lenders require up to 12 months of rental history before refinancing)
• Market Accessibility: Ridge Street accepts properties in seasonal, vacation, rural markets (Other DSCR lenders may restrict lending in seasonal or rural markets)
• Operational Flexibility: Property management company not required (Other DSCR lenders may restrict property management involvement)
• Operational Flexibility: Property management company not required (Other DSCR lenders may restrict property management involvement)

‍Managing Your Airbnb With A DSCR Loan

Strategies for Successful Property Management

• Maintain a Strong DSCR Ratio: Monitor property income. Although you can obtain a loan with a DSCR of 1.0 it is recommended that for an Airbnb you maintain the DSCR at 1.1 or above.
• Budgeting for Operating Costs and Contingencies: Allocate funds for property maintenance, management fees, and unforeseen expenses.
• Use an Experienced Airbnb Property Manager: Partner with experienced property managers to optimize occupancy rates and rental income.

‍Interested in Working With Us?

‍With Ridge Street, getting DSCR loan for your Airbnb project is simpler than you may think.

It takes 2 minutes to Request a Term Sheet or to Get Pre-Approved.

‍