Using DSCR Loans for Surprise Short‑Term Rentals

Thinking about buying a home in Surprise and running it as an Airbnb, but not sure how to qualify without leaning on W‑2 income? You are not alone. Many investors use DSCR loans that look at a property’s rental cash flow instead of personal debt‑to‑income. In this guide, you’ll learn how DSCR loans work for short‑term rentals in Surprise, what lenders actually count, the local rules and taxes to plan for, and a simple plan to move forward with confidence. Let’s dive in.

What a DSCR loan is

A DSCR loan qualifies you based on the property’s income compared to its payments. In short, DSCR = net operating income divided by annual debt service. A DSCR above 1.0 means the property covers its payment; many lenders target a higher cushion. You can review the basic formula on the debt service coverage ratio overview.

Why DSCR fits Surprise STRs

Surprise draws seasonal demand, including Spring Training for the Kansas City Royals and Texas Rangers at Surprise Stadium, plus winter travelers across greater Phoenix. That seasonality can support strong peak months and softer summers, which matters when you model cash flow. Learn more about these demand drivers on the Surprise, Arizona city overview.

Lenders know seasonality exists, so they often haircut projected income to create a buffer. Your plan should show how pricing, operations, and reserves handle slower months while still meeting target DSCR.

How lenders underwrite STR income

What income they count

• Historical short‑term rental income from platforms or your manager’s ledger, usually 12 months of statements if available.
• If there is no stable STR history, many lenders fall back to the appraiser’s long‑term rent schedule (Form 1007), which can be lower than STR projections. This fallback is common, as outlined in DSCR underwriting discussions.
• Some STR‑friendly programs will consider third‑party projections such as AirDNA. A few accept projections more fully for experienced operators, while many apply adjustments. See examples of this policy on STR‑friendly lending program pages.

Common lender adjustments

• Expense or vacancy buffers that reduce gross revenue by 20 to 25 percent to reflect cleaning, management, utilities, repairs, and seasonality. This raises the hurdle your property must clear. You can see how conservative treatment shows up in investor‑focused DSCR analyses.
• Long‑term rent fallback from the appraisal if the property is vacant or lacks STR history, which may lower qualified income versus your projections.

Typical DSCR terms you can expect

• Minimum DSCR: many programs target roughly 1.0 to 1.25 for approval. Specialty programs might allow lower DSCRs with higher rates or lower LTVs, as noted in this DSCR loan guide.
• Down payment and LTV: purchases are often capped around 70 to 80 percent LTV depending on credit and market segment. See examples of program ranges and credit/reserve expectations in this STR DSCR lender roundup.
• Rates and fees: DSCR loans are usually priced above conventional investment loans because they are often non‑QM or portfolio products. Review typical pricing differences in this DSCR pricing overview.

Local rules and taxes to plan for

Arizona law limits cities from banning STRs while allowing them to enforce health, safety, nuisance, and registration rules. If Surprise has a local registration or business license, you will need to comply. Read the state framework in A.R.S. § 9‑500.39.

Short‑term stays under 30 days are taxable as transient lodging and subject to Arizona transaction privilege tax (TPT). Online platforms may collect and remit some taxes for you, but you should confirm coverage and licensing requirements with the Arizona Department of Revenue and register if you take direct bookings. See ADOR short‑term lodging guidance.

Beginning January 1, 2025, ADOR guidance notes that residential rentals of 30 days or more should no longer be required to collect and remit city TPT, while short‑term lodging remains taxable. Review the update and licensing details in ADOR’s residential rental guidance.

What lenders will want to see

• STR platform payouts or a 12‑month booking ledger, if available.
• An appraisal with a Form 1007 rent schedule. Even if STR projections are accepted, some lenders analyze both.
• If using projections, a reputable market report (such as AirDNA) plus your pricing and management plan.
• Proof of tax compliance, including your TPT license and any city requirements if applicable.
• Insurance declarations. Some municipalities set minimum liability coverage; confirm with your lender and the city.

Example DSCR math for a Surprise STR

Here is a simple illustration. Suppose your projected gross STR revenue is $48,000. If you apply a 25 percent operating expense buffer, NOI would be $36,000. If your annual principal, interest, taxes, insurance, and HOA total $30,000, the DSCR is 1.20. If a lender requires 1.25, you would need to improve revenue, lower expenses, or increase your down payment to qualify. You can review the DSCR formula basics on the coverage ratio overview.

Red flags that can derail approval

• HOA or condo rules that restrict or prohibit STRs.
• Unresolved code or nuisance issues at the property.
• Seasonality that is not accounted for in your pricing, reserves, or underwriting model.
• Missing TPT registration or incomplete city compliance if Surprise requires it.

A step‑by‑step plan to move fast

1. Verify Surprise’s current STR rules with the city and confirm ADOR tax obligations for your plan.
2. Pre‑underwrite income using both STR projections and the long‑term rent schedule to see your range.
3. Gather documents: platform statements, management plan, appraisal, TPT license, and insurance.
4. Shop DSCR lenders and ask in writing whether they accept STR projections or require appraiser rent.
5. Structure offers around DSCR: test different down payments and rate scenarios to hit target coverage.
6. Close with a compliance checklist and an operations launch plan that addresses seasonality.

Work with a finance‑trained local partner

Buying the right STR in Surprise starts with clear underwriting and ends with consistent operations. If you want a boutique, finance‑first approach from someone who lives the STR numbers and the day‑to‑day operations, let’s talk. Connect with Anthony Escobar to evaluate a property, model DSCR scenarios, and execute a turnkey plan from acquisition to optimization.

FAQs

What is a DSCR loan for STRs?

• A DSCR loan qualifies you primarily on a property’s rental cash flow versus your personal debt‑to‑income, using the ratio of net operating income to annual mortgage payments.

How do lenders count Surprise Airbnb income?

• Many prefer 12 months of verified platform payouts; without history, they often use an appraiser’s long‑term market rent or adjust third‑party STR projections.

Do DSCR lenders accept AirDNA data?

• Some specialty lenders will consider AirDNA or similar projections, sometimes with a haircut, while others will not use projections at all.

What down payment do I need for a DSCR loan?

• Many programs cap purchases around 70 to 80 percent LTV, with stronger files sometimes qualifying for the higher end of that range.

What taxes apply to a Surprise short‑term rental?

• Stays under 30 days are taxable as transient lodging under Arizona’s TPT system; platforms may remit some taxes, but you should confirm coverage and register if you take direct bookings.