Financing Luxury Short-Term Rentals with DSCR Loans (Case Study)

With demand for high-end vacation homes rising and platforms like Airbnb and Vrbo surging in revenue, investors are turning to luxury short-term rentals (STRs) as a lucrative niche. But financing these properties—especially in the $750K to $2M+ range—can be challenging with traditional lending.

Enter DSCR loans (Debt Service Coverage Ratio), a powerful non-QM financing option that evaluates property cash flow, not personal income.

In this 2025 case study, we break down exactly how one investor financed a $1.2M luxury STR using a DSCR loan—plus key tips to replicate this strategy for your next upscale investment.

Why Use DSCR Loans for Luxury STRs?

DSCR loans are ideal for high-end short-term rental properties because they:

• Don’t require tax returns or W-2s
  
• Allow title to be held in an LLC or corporation
  
• Qualify based on projected or historical rental income
  
• Can fund quickly—often within 21–30 days
  
• Offer loan amounts up to $5M+
  

Read our DSCR Loan Basics Guide

Case Study: $1.2M Luxury STR in Scottsdale, AZ

Investor Profile:

• Full-time real estate entrepreneur
  
• Owns 6 existing STRs
  
• $300K available capital
  
• Operating through an LLC
  

Property Details:

• $1.2M luxury home in Old Town Scottsdale
  
• 5 beds, designer pool, theater room
  
• Projected average nightly rate: $850
  
• Estimated occupancy: 65%
  
• Gross monthly income projection: ~$16,575
  

Loan Structure:

• DSCR loan amount: $960,000 (80% LTV)
  
• Rate: 8.25% (30-year fixed)
  
• Monthly P&I: ~$7,176
  
• Monthly PITI: ~$8,300 (incl. taxes/insurance)
  

DSCR Calculation:
$16,575 ÷ $8,300 = 2.00 DSCR
Well above the 1.0–1.25 requirement

Use our DSCR Calculator to run your own numbers

How the Investor Qualified Using STR Income

The investor presented:

• A short-term rental income projection report from a licensed appraiser (Form 1007 with STR addendum)
  
• Booking history from other STRs in the same LLC
  
• LLC operating agreement
  
• 30 days of bank statements
  

The lender did not request tax returns or W-2s, and the loan was approved in 19 business days.

Want help qualifying your luxury STR deal?
Book a call with a DSCR loan expert

Advantages of Using DSCR Loans for High-End Vacation Properties

1. Flexible Property Use
   Many DSCR lenders allow second homes and short-term rental use.
   
2. No Cap on Property Count
   Great for investors scaling portfolios beyond 5 or 10 financed homes.
   
3. LLC-Friendly
   Avoid holding assets in your personal name—a must for STR operators.
   
4. Profit-Driven Approval
   If the numbers work, you’re in. No need to “explain away” tax write-offs.
   

Tips for Financing Luxury STRs with DSCR Loans

• Use professional income projections. Most lenders accept Form 1007 with STR analysis.
  
• Have a polished STR business profile. Lenders love experience—show off your Airbnb/Vrbo stats if possible.
  
• Prepare for slightly higher rates. Expect 0.75–1.5% higher than conventional, but the faster approval and flexibility often outweigh it.
  
• Stay above 1.2 DSCR. This gives you rate discounts and access to better terms.
  

Not sure your property will qualify?
Submit your deal for a free DSCR eligibility review

FAQs: DSCR Loans for Short-Term Rentals

Read Next:

• How to Use Multiple DSCR Loans to Maximize Leverage Without Hitting Caps
• Best DSCR Loan Lenders for Short-Term Rentals (Airbnb & STR Properties)
  

Final Thoughts

Luxury short-term rentals are one of the hottest real estate segments in 2025—and DSCR loans offer a flexible, fast way to finance these cash-flow machines without jumping through traditional hoops. Whether you’re buying your first high-end vacation rental or expanding a portfolio, this strategy gives you leverage without limits.

Have a luxury STR in mind?
See if it qualifies for a DSCR loan today

Speak with a financing strategist to build a custom short-term rental loan plan.
Schedule your free consultation