What the rule says, in plain terms
Phoenix, like many Arizona cities, expanded where accessory dwelling units (ADUs, sometimes called casitas or guest houses) can be built. Alongside that, the city adopted a rule tying short-term rental use of newer ADUs to owner occupancy. Under the city's published rules, for ADUs with a certificate of occupancy issued on or after September 14, 2024, the owner must attest that they will live on the property in order to use the ADU as a short-term rental. The requirement is effective April 4, 2026.
Rules change. Before you rely on any ADU income, confirm the current requirement with the City of Phoenix and read the actual code language or ask an Arizona real estate attorney.
Why it matters for DSCR financing
The loans we arrange are business-purpose loans for non-owner-occupied investment property. If you, or a family member, live on the property, it is not an investment-only property, and it falls outside these programs. So a Phoenix deal that only works because the owner lives in the main house and rents a newer ADU on Airbnb is not a DSCR deal.
We do not arrange owner-occupied or consumer-purpose loans, so if that is your plan, you would need a different kind of financing from a different provider.
Situations that still work
- The main home as the STR, no ADU income counted. If nobody lives on the property and the main house is permitted as an STR, the lender can read its income. The newer ADU might sit unused, be rented long-term (where allowed) or serve as owner storage, but not as a residence for you.
- Older ADUs. The rule as published applies to ADUs with a certificate of occupancy on or after the cutoff date. An ADU permitted earlier may be treated differently. Confirm the date on the certificate and the current city position.
- Long-term rental of the ADU. Renting the ADU on a 12-month lease is a different use; ask the city whether it is allowed for your property and how the lender would treat the income.
How a lender sees a home with an ADU
Even when the rule is not an issue, ADUs complicate appraisal and underwriting. Lenders ask whether the ADU was permitted, whether it has its own address or meter and whether the property counts as one unit or two. Some DSCR programs count ADU income; some only count the main home. Bring the permit history and the certificate of occupancy to the conversation.
Example with user-style inputs: a north Phoenix home with a newer casita has a full payment of $4,400. Counting the main home's short-term income of $5,300, the ratio is 5,300 / 4,400 = 1.20. Adding $1,500 of casita STR income would show 1.55, but under the ADU rule that income would require you to live on site, which takes the property out of investment-only lending. The number that matters is 1.20.
Math illustration only, using user-style inputs.
Why the seller's numbers may not be your numbers
Many Phoenix homes come to market with a short-term rental history the seller is proud of. Before you lean on it, separate the income by structure. If part of the seller's booking revenue came from a newer ADU, that slice may not be available to an investor owner under the city rule. If the seller lived in the main house while renting the ADU, the history tells you little about how the whole property performs as an investment.
Ask for payout statements broken out by listing. Then rebuild the ratio using only the income you could actually earn as a non-occupant owner. If the deal still works, you have a sound basis for the loan conversation. If it does not, it is better to know before the inspection period ends.
Questions to ask before you make an offer
- When was the ADU's certificate of occupancy issued?
- Does the seller's STR income include the ADU? If so, how much?
- Does the deal still work on the main house alone?
- Do the HOA rules (if any) allow STRs on either structure?
- Is there a permit history for the ADU?
Then send us the scenario with the answers. For the rest of the Phoenix rules, see Phoenix STR financing and the north Phoenix and Desert Ridge guide, where newer casitas are common.
Questions investors ask
Can I live in the main house and Airbnb my Phoenix ADU with a DSCR loan?
No. DSCR financing through Loan Daddy is for business-purpose, non-owner-occupied investment property only. A property where you live, even part-time, needs a different consumer product, and we do not arrange those.
Does the Phoenix ADU rule apply to every casita?
As published by the city, it applies to ADUs with a certificate of occupancy issued on or after September 14, 2024, effective April 4, 2026. Confirm the current rule and your ADU's certificate date with the City of Phoenix.
This guide summarizes rules generally and is not legal or tax advice. Check current Phoenix, Scottsdale, Tempe and HOA rules before you buy. Nothing here is a commitment to lend.