Does a 120-Night Cap Kill Your DSCR? We Did the Math
Not always — but it haircuts your revenue, and that’s what moves the DSCR. A night cap limits how many nights you can rent, so we scale projected revenue down to the capped share of an uncapped year before computing the ratio. Sometimes it still pencils; often it doesn’t. Here’s the math.
NightYield Editorial
STR-DSCR research & underwriting desk
Published 2026-05-28 · Updated 2026-06-15
How a night cap becomes a DSCR haircut
Start from an uncapped revenue projection — say a market that would otherwise book around 250 rentable nights a year. A 120-night cap means you can legally rent 120 of those nights, so the cap factor is 120 ÷ 250 ≈ 0.48. Multiply projected revenue by 0.48 and you have the cap-adjusted figure that actually services the loan.
Before and after, on a real ratio
Take a mid-priced purchase where uncapped revenue would comfortably clear a 1.0 DSCR. Apply the cap factor and monthly revenue drops by more than half; PITIA doesn’t move. The result is frequently a sub-1.0 ratio — below most STR-lender floors — even though the property looked strong on the headline number.
- Pull the uncapped projection for the bed/bath/type.
- Apply the city’s cap factor (cap ÷ assumed available nights).
- Divide the cap-adjusted monthly revenue by PITIA at the STR-overlay rate.
- Compare to each lender’s DSCR floor — that’s your real qualification.
When a capped deal still works — and the honest pivot when it doesn’t
High-ADR markets, low purchase prices, and bigger down payments can all keep a capped deal above the floor. When the cap pushes you under, the realistic move is a mid-term-rental (30+ day) strategy that isn’t subject to the nightly cap and re-qualifies the loan on long-term rent.
Before you write an offer in a capped city, confirm the current rule — STR laws change monthly — and run the cap-adjusted DSCR on the exact address, not the headline projection.
Key takeaways
- A night cap scales projected revenue to the capped share of an uncapped year before the DSCR is computed.
- A 120-of-~250-night cap ≈ a 48% revenue haircut — enough to push many strong-looking deals below a lender floor.
- PITIA doesn’t change when revenue is cut, so the ratio falls hard.
- High ADR, a lower price, or more down payment can keep a capped deal above the floor.
- When it won’t pencil, a 30+ day mid-term-rental pivot sidesteps the nightly cap and re-qualifies on monthly rent.
FAQ
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