Short-term rental DSCR loans in Washington

How lenders count short-term income

A long-term rental loan uses a lease or the appraiser's market rent. A short-term rental program needs a different kind of evidence: twelve or more months of booking history for an operating property, or a third-party analysis of expected nightly rates and occupancy for a new one. Lenders often apply their own discount for seasonality and operating costs, so the income they credit is usually lower than gross bookings.

Only some wholesale lenders offer STR DSCR programs, and they differ on documentation, minimum ratios and which markets they accept. That is a natural fit for a broker: we take the property to the programs that accept STR income and compare them.

Washington rules come first

Not legal advice. Confirm the rule for the exact address with the city or county.

• Seattle: operators are generally limited to two dwelling units, their primary residence and one other, and the additional unit must comply with RRIO. Because loans arranged here are non-owner-occupied, Seattle STR income rarely drives a file.
• Mountain and coastal towns: communities near the Cascades passes, the Olympic Peninsula, the Long Beach Peninsula and the San Juan Islands each set their own licensing, caps or zoning limits.
• HOAs and condos: many associations restrict rentals shorter than a set minimum term. Read the covenants before you buy.
• Taxes: stays of fewer than 30 consecutive days are generally treated as lodging for retail sales and lodging tax purposes by the Department of Revenue.

A conservative way to underwrite

Many Washington investors run the ratio on long-term rent first. If the property reaches a workable DSCR as a regular rental, any STR premium is upside, and you are protected if a city tightens its rules. If the property only works on nightly income, confirm the use is lawful, that the program accepts STR income, and that your reserves can absorb a slow season.

Example: a cabin near a ski area could earn $3,000 a month as a long-term rental, and the lender credits $3,900 in STR income after its discount. Against a $3,200 payment, the long-term ratio is about 0.94 and the STR ratio is about 1.22. The second number is only useful if the STR use is legal and stays legal. Illustrative numbers, not a loan offer.

Insurance and operating costs

Short-term rentals need coverage written for that use; a standard landlord policy may not apply. Mountain properties bring snow load and wildfire questions, and coastal properties may sit in flood zones. Cleaning, supplies, furnishings and platform fees do not appear in the DSCR, but they decide whether the property makes money.

Questions investors ask