Short-term rentals can print cash—but DSCR lenders care as much about paperwork as they do about revenue. An STR with missing permits or the wrong insurance is a liability. The income might be real, but to a lender it’s not bankable until it’s documented.
Insurance: The First Gate
Most landlord policies exclude transient stays. You’ll need:
- STR endorsement on a landlord policy
- Specialized STR policy with business income coverage
- Commercial policy for multi-unit STRs
Lenders want binders showing correct occupancy class, liability limits, and premiums. Missing this stalls files.
Licenses & Permits
Cities vary: some require STR licenses with annual renewals; others ban them outright. Lenders don’t want exposure to “illegal” income. Prove legality with:
- Permit certificate or portal screenshot
- Zoning/HOA letter if silent
- Proof of renewal path if pending
Taxes: Who Collects?
Airbnb/VRBO may remit in some cities. In others, you’re on the hook. Provide:
- Registration number
- Last filings or schedule
- Jurisdiction rate & cadence
Case Studies
Case A (Condo): Missing STR endorsement. Fixed with HOA letter + $1M liability STR policy. Closed within a week.
Case B (Cabin): Permit pending. Lender approved with conservative DSCR haircut + conditional closing. Cleared once license issued.
Seasonality Snapshot
| Month | Occ. | ADR | Gross |
|---|---|---|---|
| Jan | 42% | $155 | $2,019 |
| Jun | 78% | $235 | $5,544 |
| Jul | 83% | $245 | $6,307 |
| Aug | 79% | $240 | $5,856 |
| Dec | 54% | $170 | $2,842 |
Quick Evidence Pack (What to Upload)
- Insurance binder with STR endorsement + premium
- Permit/license screenshot
- HOA confirmation (if relevant)
- Tax registration & filings
- Seasonality table + platform statements
Bottom Line
DSCR loans on STRs don’t hinge only on income—they hinge on documentation. Nail insurance, licensing, and tax compliance, and your file reads “bankable.” Ignore them, and you’ll be stuck in conditional purgatory.
