On a 2-4 unit property, the entire building is treated as a short-term rental the moment 50% or more of its units are being used as short-term rentals. Below that line the loan is underwritten as an ordinary long-term rental; at that line or above, every unit in the building gets short-term rental treatment — a 60% maximum LTV, a minimum DSCR of 1.25x, and six additional months of PITIA reserves on top of the normal requirement.
There is no blending and no proration. The test is a count of units, and it produces a cliff: on a fourplex, moving one unit from a 12-month lease to nightly bookings can be the difference between an 80% loan and a 60% loan. On a duplex it is even sharper, because a duplex has only two units and one of them is exactly 50%.
This page explains the threshold precisely, shows what changes on each side of it, and lays out how someone running a mixed strategy should think about the unit mix before an application is submitted rather than after an appraisal comes back.
The threshold, stated exactly
Two definitions do the work.
First, what counts as a short-term rental. In our DSCR program, short-term rentals are properties in which the rental term is less than 12 months, relatively variable in duration — a short weekend, two weeks, several months — and may not be subject to a traditional lease agreement.
Second, how that definition is applied to a building with more than one unit.
Read the two together and the mechanic is clear. The classification is not applied unit by unit. It is applied to the property. Once the count of short-term units reaches half the building, the property is a short-term rental property, and the short-term rental rules govern the file — including the units that have a signed 12-month lease and a tenant who has lived there for three years.
Where the line falls on each building size
Because the test is "50% or more of the units," the number of short-term units it takes to tip a building is not the same across 2-4 units. It is worth writing out, because owners consistently assume they have more room than they do.
| Units | Short-term units | Share | Deemed a short-term rental? |
|---|---|---|---|
| 2 (duplex) | 1 | 50% | Yes |
| 3 (triplex) | 1 | 33% | No |
| 3 (triplex) | 2 | 67% | Yes |
| 4 (fourplex) | 1 | 25% | No |
| 4 (fourplex) | 2 | 50% | Yes |
| 4 (fourplex) | 3 | 75% | Yes |
Three things fall out of that table.
A duplex has no mixed lane. One short-term unit out of two is exactly 50%, which satisfies "50% or more." A duplex owner who wants any short-term income at all from the subject property is financing a short-term rental property, full stop. There is no version of a duplex where one unit is on Airbnb and the file is still underwritten as a long-term rental.
A triplex is the most forgiving shape. One of three units is 33%, comfortably under the line, and the second unit is what tips it. A triplex is the only 2-4 unit configuration where a single short-term unit leaves real headroom before the threshold.
A fourplex tips at two. One of four is 25% and safe. The second short-term unit takes the building to exactly 50% and reprices the entire loan. That second unit is the expensive one, and it usually does not feel expensive when the decision is being made — it feels like an incremental revenue experiment on one apartment.
What actually changes when it tips
The consequences are not cosmetic. Four separate requirements move at once, and they move against the borrower in the same direction.
| Not deemed a short-term rental | Deemed a short-term rental | |
|---|---|---|
| Maximum LTV | Per the eligibility matrix — up to 80% on a purchase or rate-and-term refinance at 700 FICO with a loan amount to $1,500,000 | 60% maximum for all Standard and Cross Collateralized (Blanket) transactions using short-term rental income to qualify |
| Minimum DSCR | Program minimum as determined by individual loan characteristics | 1.25x |
| Reserves | 3 months PITIA at DSCR at or above 1.0; 6 months below 1.0 | An additional 6 months PITIA on top of the base requirement |
| Interest-only minimum DSCR | Program minimum as determined by individual loan characteristics, 1.10x | Program minimum as determined by individual loan characteristics plus .10, qualifying on ITIA |
| Income calculation | Gross rent from the lease or the appraiser's rent schedule, per the standard rules | Gross monthly rent multiplied by 80%, to account for the costs of operating a short-term rental |
| Inexperienced investors | Permitted, with their own separate LTV, DSCR and loan-size limits | Not permitted to qualify via short-term rental |
The 80% multiplier on gross rent is its own subject with its own arithmetic, and we cover it separately in [how lenders discount short-term rental income on a DSCR loan](/blog/how-lenders-discount-airbnb-income-on-a-dscr-loan). What matters here is that it arrives as part of the package. You do not get to keep the long-term rental income calculation for the long-term units and apply the discount only to the nightly ones. The guideline's short-term rental calculation is written at the property level — monthly gross rent multiplied by 80%, divided by PITIA, or ITIA on an interest-only loan — and the property is what has been reclassified.
The cliff, in numbers
The reason this rule catches people is that it has no slope. Every other adjustment in the program is a step — a 5% reduction here, a 10% reduction there. This one is binary. The building is either a short-term rental or it is not, and the unit count decides.
On a $600,000 fourplex, that gap is $120,000 of loan proceeds, triggered by a change in how one apartment is rented. Nothing about the building changed. No appraisal moved. One unit's use changed and the maximum advance dropped by 20 points.
Reserves move the same way — not by a percentage, but by a fixed block.
The guideline states the base requirement as 3 months PITIA at a DSCR of 1.0 or above (6 months below 1.0), and states separately that an additional 6 months of PITIA reserves are required for short-term rental. Stacked, that is 9 months of verified, liquid post-closing reserves on a file where the DSCR clears 1.0 — 12 months if it does not.
Those reserves have to be real. Gift funds are not permitted to meet reserve requirements, and funds used for down payment and closing costs cannot be double-counted as reserves. Cash-out proceeds may be used for reserves only if FICO is above 700.
What "being used as" means in practice
The rule turns on how units are being used, not on how they are zoned, titled, or described in a loan application. Underwriting will form its view from the file, and the file has more evidence in it than most borrowers expect:
- The appraisal and the appraiser's rent schedule (Form 1007 or 1025), which describes the units and the market rents for them
- The leases themselves, including their term length
- On a refinance, the rental history — either a 12-month statement from a third-party rental or management service, or 12 months of the borrower's own bank statements evidencing rental deposits
- Public listings. The guideline references listing on short-term rental websites such as Airbnb or Vrbo directly, in more than one place, as a fact that changes treatment
If two units of a fourplex are visible as active nightly listings, describing the building as a long-term rental with some occasional overflow use is not a strategy. It is a discrepancy that surfaces during underwriting, usually late, and repricing at that point means a new maximum loan amount and a conversation about whether the deal still works.
How a mixed-strategy owner should think about this before applying
The order of operations matters. Most of the damage from this rule is self-inflicted and happens in the weeks before an application, not during underwriting.
Count the units first, then choose the strategy
Decide what the building is going to be, then finance it. If the plan is a fourplex with two units on nightly bookings, the plan is a short-term rental property and should be modeled at 60% LTV, a 1.25x DSCR floor, income at 80% of gross, and nine months of reserves. If the plan is one nightly unit and three annual leases, that is a long-term rental file and it stays a long-term rental file — as long as the second unit does not convert.
Treat the second unit as a financing decision, not an operating one
On a fourplex, the incremental revenue from converting a second unit to short-term has to be weighed against 20 points of LTV, a higher coverage floor, discounted qualifying income and six extra months of reserves. That is rarely a close call on a purchase or a cash-out. It can be an easy call on a low-leverage refinance where the borrower was not going to use the extra proceeds anyway. The point is that it is a financing decision with a price tag, not a yield-management tweak.
Do not let the mix drift during the loan
A unit's use is assessed against the file as it stands. Converting a third unit to nightly bookings mid-process, or letting a long-term lease expire and filling the unit with short stays while the appraisal is being reviewed, can change the classification of the property after terms were issued.
Confirm the local rules yourself
All loans must be originated in accordance with federal, state and local regulations and restrictions pertaining to short-term rentals, and short-term rentals in New York City are not permitted under this program. Beyond that, whether your city, county or homeowners association permits nightly rentals in your building — and under what permit — is a question for your municipality and your attorney, not for a lender. We will underwrite to the answer; we do not supply it.
The other requirements do not go away
Reclassification stacks on top of the ordinary program rules rather than replacing them. On a 2-4 unit DSCR file, the ones most likely to interact:
- Minimum FICO is 660 for all guarantors on our DSCR program. Where there are multiple guarantors, rate and LTV are set by the guarantor with the lowest middle score, and every other guarantor must still meet 660.
- The 660 tier of the eligibility matrix covers 1-unit properties. For 2-4 units, the matrix's credit tiers begin at 680. A 665 score is eligible for the program but not for the maximum LTV a fourplex file might otherwise reach.
- A 2-4 unit property with FICO at or below 740 requires a DSCR of at least 1.0. For a building already deemed short-term, the 1.25x floor is the binding one, but this rule matters for the version of the file that stays under the threshold.
- A minimum DSCR of 1.25x applies to any loan amount below $150,000, independent of short-term rental status.
- Inexperienced investors are not permitted to qualify via short-term rental. An inexperienced investor is one who does not meet the experienced-investor definition: at least 12 consecutive months in the last three years owning and managing commercial or non-owner-occupied residential real estate, or ownership of three or more properties each for at least 12 months over the past 24 months. If you are on your first or second investment property and you are planning to lean on nightly income from a duplex, this is the rule that ends the conversation.
- Vacancy and unit occupancy are tested separately. How many units must be leased, and what a vacant unit costs on a refinance, is its own set of counts — we cover it in [how many units must be occupied for a DSCR refinance](/blog/how-many-units-must-be-occupied-for-a-dscr-refinance). A fully furnished unit with no lease in place is treated as vacant, and a property in that posture cannot be listed on a short-term rental website.
A worked illustration
The figures below are invented for illustration. They are not a quote, not a rate sheet, and not an approval. They exist only to show the shape of the cliff.
Assume a fourplex, a purchase, a 720 FICO experienced investor, a $700,000 price, and $6,000 a month of gross rent across four units in either configuration.
| One short-term unit | Two short-term units | |
|---|---|---|
| Classification | Long-term rental property | Deemed a short-term rental |
| Maximum LTV | Per matrix | 60% |
| Maximum loan at those caps | $560,000 at 80% | $420,000 |
| Down payment required | $140,000 | $280,000 |
| Gross rent used for qualifying | $6,000, per the standard rules | $4,800 ($6,000 x 80%) |
| Minimum DSCR to clear | Program minimum per loan characteristics | 1.25x |
| Post-closing reserves | 3 months PITIA at DSCR 1.0 or above | 9 months PITIA |
The second column is the same building. The difference is which apartment has a 12-month lease taped to the inside of a kitchen drawer.
What this page does not do
This page explains one threshold: when a partly short-term 2-4 unit property is classified as a short-term rental property, and what changes when it is. It is not an approval, not a quote, not a rate, and not a commitment to lend. Nothing here sets your pricing.
It does not work through the 80% income multiplier in detail, the 125% cap on rental history versus market rent, or the 12-month history requirement on a refinance — those have their own pages. It does not cover the unit-occupancy and vacancy counts, which are tested separately from this threshold. It does not address prepayment penalties, which vary by state, or the portfolio and blanket structures, which carry their own matrices and reserve rules.
It does not tell you whether short-term rentals are permitted in your building. Zoning, permitting, licensing, homeowners association restrictions and the tax treatment of nightly rental income are questions for your municipality, your attorney and your accountant.
Where the guideline is silent, this page says so rather than guessing. It is silent on whether a genuine short-term lease that is never publicly listed counts toward the 50% unit test, and it does not define a minimum number of nights, a booking count, or a revenue share that makes a unit "short-term" — the test is stated as how the units are being used. Get either point confirmed in writing for your specific file before you build a plan on it.
Properties owned six months or more but less than twelve may be considered on a single loan variance basis, with the income calculation at our discretion. That is a case-by-case path, not a rule you can rely on in advance.
Guideline DSCR V28 · Reviewed August 31, 2026
Published September 1, 2026 · Updated September 1, 2026
How to use this guide
This article is educational guidance, not an offer or commitment to lend. Rules, property facts, credit, leverage, documentation, and full underwriting still control any actual scenario.