The rental property appraisal

A rental property appraisal is a licensed appraiser's opinion of what an investment property is worth and, for most rental loans, what it would rent for. On a DSCR loan both numbers matter: the value sets how much you can borrow, and the appraiser's market rent, traditionally reported on the Form 1007 rent schedule, usually sets the rent the lender counts toward your coverage.

The lender orders it, you pay for it up front, and it is usually the slowest part of the DSCR loan process. A low value or a low rent figure is also the most common reason terms change late, so it pays to understand how both are reached.

What does a rental property appraisal include?

The appraiser inspects the property, inside and out, and writes up its size, layout, condition and quality, then values it the way the market would. For a house, the sales comparison approach carries the weight: recent sales of similar homes nearby, usually at least three, each adjusted for differences in size, rooms, condition, lot and location. For a 2 to 4 unit property the appraiser also gives an income approach, often based on a gross rent multiplier from comparable small rentals.

Three things in the report decide most rental loans:

• The value. The lender divides the loan by the lower of the price and the appraised value (on a purchase) to get your loan-to-value ratio, and leverage limits and pricing follow from it.
• The market rent. The appraiser's opinion of what the property would rent for, from comparable rentals. On a DSCR loan this is usually the rent in the ratio.
• The condition. Repairs the appraiser flags can make the value "subject to" completion, which means a re-inspection before closing.

Furniture, a booking business and a strong listing are not real estate. They do not add to the appraised value, even on a short-term rental that earns well.

The rent schedule: Form 1007

The Single-Family Comparable Rent Schedule, Fannie Mae Form 1007 (Freddie Mac Form 1000), is the one-page attachment appraisers have used for decades to estimate a single-family investment property's market rent. It works like a small sales comparison, for rents:

1. Three comparable rentals, with their addresses, distance, lease dates and monthly rent.
2. An adjustment to each comp's rent for utilities and furniture included, so the rents compare as unfurnished leases.
3. Adjustments for location and view, design, age and condition, room count, living area and features.
4. Comments on the range of rents in the area, the vacancy rate and the trend.
5. The appraiser's final opinion: "the monthly market rent of the subject" as of a date.

For a 2 to 4 unit property, the rent analysis is built into the small residential income report (Form 1025), unit by unit, along with the income approach.

What changed in November 2026

Fannie Mae and Freddie Mac have replaced their separate appraisal forms, including the 1004, 1025, 1073 and 1007, with one redesigned report, the Uniform Residential Appraisal Report built on UAD 3.6. It is mandatory for new reports submitted to the agencies from November 2, 2026, and market rent now goes in its Rental Information section rather than on a separate 1007.

DSCR loans are not sold to the agencies, so DSCR lenders are not bound by that change, and some may keep asking for "a 1004 with a 1007" for a while. Whatever the form is called, the question is the same: what this property would rent for, unfurnished, on a long-term lease, supported by comparable rentals.

How DSCR lenders use the appraisal

A few lenders accept a lease above the appraiser's market rent, often 10% to 25% above, when you can show a few months of the rent being paid. Many order a desk review that has to land close to the appraisal; a review that comes in far lower can reduce the value used. If you are new to the coverage math, how to calculate DSCR shows how the rent figure flows through.

The appraisal belongs to the lender that ordered it, under appraiser independence rules, and is commonly good for about 120 days. Another lender usually orders its own, and a new appraisal can come in lower. Confirm the lender's minimums before you pay for one.

How is a short-term rental appraised?

This is where most investors get surprised. The 1007 was built for long-term leases: it subtracts furniture and utilities from comparable rents and asks what an unfurnished house would rent for by the year. For example, a vacation home that grosses $70,000 a year from guests might show $2,800 a month on a 1007, and if the lender uses that figure, the coverage looks nothing like your projection.

Lenders that finance short-term rentals handle the income in one of four ways:

• An appraiser's short-term income analysis. An addendum or narrative where the appraiser studies comparable short-term rentals, their nightly rates and occupancy, and gives an opinion of gross annual income. It costs extra, and not every appraiser has the experience.
• A projection from comparable listings, ordered by the lender from a rental data tool, often counted at a discount (commonly 75% to 80%) for newer hosts.
• The booking history, usually twelve months of platform statements, on a refinance of a rental already running.
• Long-term market rent, the 1007 figure, as the fallback when the property or the market does not support short-term income.

Before you pay for the appraisal, ask which method your program uses, and whether the appraiser will complete a short-term analysis. The value itself is still a sales comparison, usually against similar homes, not against the income. The guides to DSCR loans for short-term rentals and how to estimate Airbnb income cover the income side in depth.

What to do when the appraisal comes in low

A low value or a low rent figure is not the end of the loan. Work through the options in this order:

1. Read the report. Check the facts: square footage, bedroom and bathroom count, the condition rating, the comps' distance and dates. Factual errors are the strongest ground for a change.
2. Ask for a reconsideration of value, through your lender. Appraiser independence rules mean you never contact the appraiser directly. On loans sold to the agencies, a borrower gets one such request per appraisal; DSCR lenders set their own process, and most accept a written request.
3. Restructure the loan. More cash down, an interest-only option, or a program that accepts lower coverage, as in the example above.
4. On a purchase, renegotiate. A low appraisal is leverage with a seller, and an appraisal contingency in the contract may let you walk away with your deposit.
5. On a refinance, wait or improve. A smaller loan now, or a new appraisal after more seasoning, more rent history or finished work.

How to write a reconsideration request

• Name the report, its date and the appraiser, and say plainly what you think is wrong.
• Give up to a handful of better comparable sales (or rentals, for the rent), closed and nearby, each with its address, date, price, size and why it fits better.
• Point out factual errors with evidence: a floor plan, a permit, photos.
• Keep it short and factual. "The comps are wrong" changes nothing; three better comps with reasons sometimes do.

Owners who have disputed short-term rent findings report that the rent figure is hard to move after the fact, so the best defense is the preparation below.

How to prepare for the appraisal

• Hand over an improvement list with dates and costs, and before and after photos. Renovations the appraiser does not know about are not in the value.
• Have the permits for any addition, conversion or major system work.
• Finish the repairs first. Unfinished work leads to a "subject to" value and a re-inspection.
• Give the lease and rent history, and for a short-term rental, your booking statements or the comparable listings you relied on, through the lender.
• Make access easy. Utilities on, every room open, tenants warned, keys or codes ready.

A quick estimate from the value calculator before you order tells you whether the price you are paying is near what comparable sales support. It is not an appraisal, but a big gap is a warning.

General education, not financial, tax or legal advice. Figures are examples: rates, rules and programs change, and every lender sets its own. Last checked November 4, 2026.