Short-term vs long-term rental DSCR in Washington
TL;DR: Long-term rental DSCR loans use a lease or market rent; short-term rental DSCR programs use booking history or a market analysis of nightly income, and only some lenders offer them. In Washington, local rules decide a lot: Seattle limits operators to two units including their own home, so most non-resident Seattle investors underwrite long-term rent, while mountain and coastal towns have their own permits.
Side by side
| Feature | Long-term rental (LTR) | Short-term rental (STR) |
|---|---|---|
| Income documented by | Signed lease or appraiser market rent | Booking history or a third-party nightly-rate analysis |
| Program availability | Broad | Narrower; some lenders only |
| Local rules | State landlord-tenant law plus city rules | City or county STR licensing, which varies widely |
| Taxes on income | Residential rent | Stays under 30 days generally carry retail sales and lodging taxes |
| Income stability | Steady, monthly | Seasonal; higher swings |
Qualitative comparison only. Terms, pricing and availability vary by lender and program.
Seattle and the rest of the state
Seattle limits short-term rental operators to their primary residence plus one more unit, and that additional unit must comply with RRIO. An investor who does not live in Seattle generally cannot run a whole-home STR there under their own license. Because loans arranged here are non-owner-occupied only, Seattle STR income rarely drives a file.
Outside Seattle, rules vary: some mountain, coastal and San Juan Islands communities license STRs, others cap or restrict them, and HOAs may prohibit them. Confirm the rule for the specific address before you rely on nightly income.
Taxes and costs that change the math
The Washington Department of Revenue generally treats stays of fewer than 30 consecutive days as lodging subject to retail sales tax and local lodging taxes, and many platforms collect some of them. STRs also carry cleaning, supplies, furnishings and higher insurance. A lender’s STR income figure may be discounted for these costs or for seasonality.
A practical approach is to underwrite on long-term rent and treat any STR premium as upside. If the property only works on nightly income, make sure the use is lawful and that your program accepts STR income before you buy.
Related pages
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