Short-term rentals (STRs) like Airbnb and VRBO have become one of the most profitable real estate investment strategies, allowing investors to generate higher returns than traditional long-term rentals. However, securing financing for STR properties isn’t always easy—especially with traditional lenders hesitant to approve loans based on fluctuating Airbnb income.
That’s where EDSCR (Economic Debt Service Coverage Ratio) loans come in. These loans focus on property cash flow rather than personal income, making them perfect for short-term rental investors who want to scale their portfolios quickly.
This ultimate financing cheat sheet will walk you through everything you need to know about EDSCR loans for short-term rentals, including how they work, qualification criteria, and tips to maximize your approval odds.
📌 Cheat Sheet Overview: What’s Inside?
🔹 What is an EDSCR Loan? (And why it’s perfect for Airbnb investors)
🔹 How EDSCR is calculated for short-term rentals
🔹 Key lender requirements (What they don’t tell you upfront)
🔹 Top mistakes that get STR investors denied
🔹 Pro tips to secure better loan terms
🔍 What is an EDSCR Loan?
An EDSCR loan is a type of real estate financing that qualifies borrowers based on property income rather than personal income. Unlike traditional loans that require W-2s, tax returns, and debt-to-income (DTI) ratios, EDSCR loans focus on whether the property generates enough rental income to cover the mortgage.
Why EDSCR Loans Are Perfect for Airbnb Investors
✅ No personal income verification required—self-employed and full-time investors can qualify.
✅ Short-term rental income is considered (if lenders accept STR projections).
✅ Faster approvals compared to traditional mortgages.
✅ Investors can qualify for multiple properties at once.
📊 How is EDSCR Calculated for Short-Term Rentals?
Lenders use the Economic Debt Service Coverage Ratio (EDSCR) to assess whether a property’s rental income can cover its mortgage payments.
✔ If EDSCR is 1.25 or higher: You’re in the “safe zone” (lenders love this).
✔ If EDSCR is between 1.0 – 1.24: You may still qualify, but with stricter terms.
✔ If EDSCR is below 1.0: Lenders see this as risky, and you may need to show additional reserves or a higher down payment.
📢 Pro Tip: Many lenders use long-term rental estimates instead of Airbnb income in their calculations. If STR earnings are higher, work with lenders who accept short-term rental income projections.
📌 Key Lender Requirements for EDSCR Short-Term Rental Loans
Even though EDSCR loans eliminate personal income verification, lenders still have strict criteria for STR financing.
✅ Minimum EDSCR Ratio → Most lenders require 1.25 or higher for STRs.
✅ Higher Down Payment → Typically 25-30% for short-term rentals.
✅ Credit Score Requirements → 680+ is ideal, but some lenders allow 640+.
✅ Cash Reserves → Lenders may require 6-12 months of mortgage payments in reserves.
✅ Property Location & Demand → STRs in high-tourism or business-travel areas get better loan terms.
📢 Pro Tip: Some lenders require STR properties to have a history of rental income, so if you’re buying a new Airbnb, consider renting it long-term for a few months before applying for a loan.
🚨 Top Reasons STR Investors Get Denied for EDSCR Loans
🚫 1. Using Airbnb Income Without Lender Approval
- Some lenders don’t accept short-term rental income projections and will only consider long-term rental comps (which can be lower).
✅ Solution: Work with lenders who accept Airbnb/VRBO revenue history or vacation rental market projections.
🚫 2. EDSCR Ratio Below 1.0
- If your property’s rental income doesn’t fully cover the mortgage, your loan might get denied.
✅ Solution: Choose high-demand locations and minimize property expenses (lower HOA fees, property taxes, etc.).
🚫 3. Not Enough Reserves
- Some investors assume they don’t need reserves since EDSCR loans focus on property cash flow.
✅ Solution: Keep at least 6-12 months of mortgage payments in liquid assets before applying.
🚫 4. Credit Score Too Low
- While EDSCR loans don’t require income verification, lenders still check credit scores and debt obligations.
✅ Solution: Maintain a 680+ credit score and avoid new credit inquiries before applying.
💰 How to Secure the Best EDSCR Loan Terms for Your STR
🏡 1. Target High-Performing STR Locations
- Focus on tourist hotspots, business-travel cities, or year-round vacation areas.
📈 2. Show Strong Rental Projections
- If your STR doesn’t have a rental history, use AirDNA or STR market analysis reports to prove rental demand.
🔍 3. Work With STR-Friendly Lenders
- Some lenders refuse to finance short-term rentals—find lenders who specialize in Airbnb/STR loans.
💳 4. Improve Your Credit Score
- A higher credit score (700+) can get you lower rates and better loan terms.
🏦 5. Maintain Strong Cash Reserves
- Keep at least 6-12 months of reserves to avoid lender concerns.
📌 Final Thoughts: Is an EDSCR Loan Right for Your STR Investment?
If you’re an investor looking to scale your Airbnb or short-term rental business, an EDSCR loan can be one of the best financing options because:
✔ No W-2s or tax returns required—great for self-employed investors.
✔ STR rental income is considered (with the right lender).
✔ Faster approval process than traditional loans.
✔ Easier to qualify for multiple investment properties.
🚀 The key is to work with the right lenders, maintain strong reserves, and ensure your rental income meets the EDSCR requirements.
💡 Ready to grow your Airbnb portfolio? Start exploring STR-friendly EDSCR loans today!