Short-term vs long-term rental DSCR loans in Kentucky

How lenders count the rent

For a long-term rental, the appraiser completes a rent schedule comparing your property with similar leased units nearby. The lender generally uses the lower of that market rent and the actual lease. A signed 12-month lease on a Lexington townhome or a Bowling Green duplex is about as clean as rental income gets.

For a short-term rental, programs use one of two sources: a trailing record of bookings from the platforms you list on, or a projection from a third-party data provider for properties without a history. Many lenders apply a haircut to nightly income to account for seasonality and vacancy between stays, and some cap how much short-term income can count.

What each file needs

Long-term files are short: lease, rent schedule, tax bill, insurance quote, entity documents and reserves. The carrying cost is mostly fixed, and tenants usually pay their own utilities.

Short-term files need more. Expect booking statements or a projection report, evidence that the property is furnished, an insurance policy written for short-term rental use, and confirmation that nightly rentals are allowed where the property sits. The carrying cost is higher too: utilities, internet, cleaning, supplies and platform fees all come out of the owner’s side.

• Long-term: 12-month lease or market rent, standard landlord policy, tenant-paid utilities in most cases
• Short-term: booking history or projection, furnished unit, short-term rental insurance, owner-paid utilities
• Both: business-purpose, non-owner-occupied investment property only

Seasonality and the ratio

Kentucky nightly demand is real but uneven. Bourbon tourism, horse racing and sales calendars, university events, and lake and park seasons all drive bookings at different times of year. A property that books solidly in spring and fall can sit quiet in late winter.

Because the ratio is a monthly test, lenders smooth that unevenness by looking at a full year of income. If the property only clears the ratio on its best months, it will not clear underwriting. Running the long-term rent through the calculator first shows you the floor; nightly income is what you add if the program and the city allow it.

Local rules decide whether short-term is even an option

Louisville, Lexington and several Northern Kentucky cities regulate short-term rentals through zoning, registration or permit requirements, and those rules change. Some areas allow non-owner-occupied short-term rentals only in certain zones or only with a conditional use approval. Condo and HOA documents can prohibit nightly stays outright.

We describe these rules generally on our market pages, but the city or county ordinance and any HOA documents are the authority. Check them before you buy a property on the assumption that it can operate as a short-term rental; a lender will.