The formula
DSCR = monthly qualifying income ÷ monthly PITIA. PITIA stands for principal, interest, taxes, insurance and association dues. The lender decides what counts as qualifying income (see how lenders count Airbnb income); you control most of the payment side through the loan amount and term.
Step 1: Build the monthly payment
Suppose you are evaluating a three-bedroom Scottsdale home with a pool. You have a quote for the loan and gather the other costs:
| Payment piece | Annual | Monthly |
|---|---|---|
| Principal and interest (from your quote) | — | $3,350 |
| Property taxes | $3,000 | $250 |
| STR-use insurance | $3,120 | $260 |
| HOA dues | — | $90 |
| Total PITIA | $3,950 |
The principal and interest figure comes from your own quote; we do not publish pricing. The calculator computes it from the loan amount, rate and term you enter.
Step 2: Average a full year of income
Valley STR income moves with the seasons. Here is an illustrative year of monthly payouts for the same home:
| Season | Months | Illustrative monthly payouts | Season total |
|---|---|---|---|
| Peak (cooler months, events) | Jan–Apr | $7,500 | $30,000 |
| Shoulder | May, Oct–Dec | $5,000 | $20,000 |
| Summer | Jun–Sep | $3,000 | $12,000 |
| Year | 12 | $62,000 |
The annual total of $62,000 averages to about $5,167 a month. If you had only the four peak months, you might think the home earns $7,500 a month; if you had only summer, $3,000. Neither is right. This is why many programs want 12 months.
Step 3: Divide
DSCR = 5,167 / 3,950 = 1.31. The income covers the full payment with about $1,200 a month of room before operating costs. Many STR programs would consider that a workable ratio.
Now test what the lender might actually use. If the program nets out platform fees and counts $4,700, the ratio is 4,700 / 3,950 = 1.19. If it uses long-term market rent of $3,400, the ratio is 3,400 / 3,950 = 0.86.
Step 4: Test loan sizes
If the ratio is too thin for the program you want, the most direct lever is the loan amount. A smaller loan lowers principal and interest and raises the DSCR. Using the calculator, try a few amounts and note where the ratio crosses the level you are comfortable with. Taxes, insurance and HOA dues stay the same regardless of loan size, so on homes with high dues the lever is weaker.
Term matters too: a longer amortization lowers the monthly principal and interest. Some programs also offer interest-only periods, which lower the payment for a time; ask how the lender calculates DSCR on those.
Step 5: Read the result honestly
- Below 1.00: the income does not cover the payment. Some programs allow it with more cash in the deal or more reserves; many do not.
- Around 1.00 to 1.20: break-even territory. Workable with some programs, little cushion for a slow summer.
- Above 1.20: room to spare, usually more program choices.
Remember the formula ignores cleaning, utilities, supplies, platform fees and management. Run your own operating budget separately.
All numbers on this page are user-style inputs for a math illustration. They are not a quote, a loan offer or a statement of available terms.
Common math mistakes on STR deals
- Using peak-month income. A great March is not a monthly average. Use 12 months, or a conservative estimate.
- Forgetting HOA dues. Dues are part of the payment in the ratio, so a condo with high dues needs more income to reach the same DSCR.
- Using a landlord insurance quote. STR-use coverage usually costs more, and the higher premium belongs in the payment.
- Mixing gross and net. If the lender nets out platform fees, your gross booking total overstates the income it will use.
- Treating the ratio as profit. A ratio above 1.00 covers the loan payment, not cleaning, utilities or management.
Fixing these before you send a scenario gives you a number that will hold up when a lender runs it.
One more habit worth building: save your inputs. When a lender asks how you reached your projection, a simple sheet with the monthly income source, the tax bill, the insurance quote and the HOA statement answers the question in one step.
Try it on your deal
Open the STR DSCR calculator, plug in your numbers and then send the scenario. We will tell you which programs read the income in a way that matches your math.
Questions investors ask
What DSCR do I need for a short-term rental loan?
It varies by program. Many look for income at least equal to the payment (a ratio of 1.00 or higher), and STR programs often prefer more cushion. Some allow lower ratios with more cash in the deal or more reserves.
Does the DSCR formula include cleaning and management costs?
Usually not. The standard formula uses principal, interest, taxes, insurance and HOA dues. Cleaning, utilities, platform fees and management are real costs that affect your cash flow, so budget them separately.
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.