Hawaii DSCR Loans for STR Financing

Frequently Asked Questions

What is a DSCR loan and how does it work for Hawaii real estate investors?

A DSCR loan (Debt Service Coverage Ratio loan) lets investors qualify based on the rental income their property generates instead of their personal income or credit score. As long as the property produces enough income to cover the loan payments, the deal can often move forward with minimal documentation. This type of financing is especially useful in tourism-driven states like Hawaii, where vacation rental income in areas like Honolulu, Maui, and the Big Island can far exceed traditional housing models. DSCR loans offer flexibility for investors working in high-yield, seasonal markets with strong STR potential.

How is DSCR calculated in a typical loan scenario?

Hawaii real estate investors calculate DSCR by dividing the net operating income (NOI) of a property by the total annual debt service. For example, if a short-term rental in Hawaii generates $150,000 in NOI and has $125,000 in annual mortgage, taxes, and insurance payments, the DSCR is 1.20. This means the rental brings in more than enough to cover its loan. Most Hawaii lenders want to see at least a 1.00 DSCR, but 1.20 or higher is often expected for STR-heavy markets like Maui, Honolulu, and the Big Island. Understanding DSCR in Hawaii helps investors select strong properties and secure flexible financing options.

What is considered a good DSCR ratio for Hawaii investors when applying for financing?

In Hawaii, a good DSCR ratio usually starts at 1.25 due to the state’s higher property values and stricter lending standards. While 1.00 may technically meet minimum requirements, a 1.25 DSCR in Hawaii shows that the property produces enough income to offset volatility and seasonal demand. Investors purchasing STRs in places like Maui, Honolulu, or the Big Island benefit from aiming for a higher DSCR to improve financing terms. Understanding Hawaii’s lending landscape and what constitutes a good DSCR is critical for securing real estate loans in a competitive, high-risk market.

Can I qualify for a DSCR loan if my personal income is limited?

Yes, you can qualify for a DSCR loan even if your personal income is limited. DSCR loans, often referred to as Airbnb loans when used for short-term rental properties, are designed to approve borrowers based on the income the property generates—not personal W-2s, tax returns, or debt-to-income ratios. Lenders calculate the property's debt service coverage ratio to determine if the income is sufficient to support the loan. As long as the DSCR meets the required threshold—usually 1.00 or higher—you can often be approved regardless of personal income. This makes Airbnb loans ideal for self-employed investors, business owners, or anyone scaling a rental portfolio without relying on traditional underwriting standards.

How does a lender evaluate rental income when approving a DSCR loan?

Lenders in Hawaii evaluate DSCR loans by examining the rental income potential of the property itself. In Hawaii, this often includes reviewing vacation rental income, lease agreements, or appraisal-based market rent estimates. The DSCR is calculated by dividing this income by the property’s annual debt service. If the ratio meets the lender’s requirement—commonly 1.00 or higher—Hawaii investors can qualify regardless of personal income. DSCR loans in Hawaii are especially useful for those investing in STRs across islands like Oahu, Maui, or the Big Island. Understanding how rental income is evaluated in Hawaii helps streamline financing for income-producing assets.

What’s the minimum debt service coverage ratio required for approval?

Lenders in Hawaii typically require a minimum DSCR of 1.00, but many prefer to see a stronger ratio of 1.25 due to the state’s high property values and market volatility. In some rare cases, Hawaii lenders may approve DSCR loans with ratios down to 0.75, provided there are strong reserves and equity involved. DSCR loans in Hawaii are commonly used in vacation rental markets like Honolulu, Maui, and Kona, where rental income can be seasonal. Investors in Hawaii benefit from higher DSCRs that reduce perceived risk. Understanding Hawaii’s minimum requirements ensures a more reliable path to funding and favorable loan conditions.

Who should consider using a DSCR instead of a traditional loan?

These loans are perfect for self-employed individuals, LLCs, and investors managing multiple properties. Hawaii real estate investors often rely on DSCR loans to qualify without using traditional income verification, which is especially useful in vacation-driven markets. In areas like Honolulu and Maui, Hawaii borrowers can leverage rental income to grow portfolios faster. DSCR lending in Hawaii is built for investors needing speed and flexibility.

Expanding your rental portfolio beyond Hawaii? We also offer financing in Alaska and California , making it easy to scale across the Pacific with the same asset-based approval process.