Walk down Jenifer Street or East Johnson and you will see the classic Madison rental: a two-story house split into an upper and lower flat, often with a third unit tucked into the attic. These buildings rent easily, but taxes and prices mean the numbers need careful work.
In short: LendingStreet finances Madison-area duplexes, triplexes and fourplexes with DSCR loans that qualify on the combined rent of all units, with no W-2s or tax returns and LLC borrowers allowed. Loans start at $150,000 with no stated maximum, purchases go up to 80% LTV and the standard minimum DSCR is 1.0x. In Madison, a third or fourth unit often makes the difference between a file that works and one that does not.
Most of Madison's 2-4 unit buildings are older wood-frame homes converted or built as flats. They cluster on the isthmus in Williamson-Marquette, Tenney-Lapham, Marquette and Schenk-Atwood, near campus in Regent, Vilas and Greenbush, and on the Northside. Newer side-by-side duplexes are common in Fitchburg, Sun Prairie and the east side.
Student demand from UW-Madison keeps units near campus leased, often on August-to-August cycles, while the east side and Northside rent more to working tenants.
Suburban duplexes are a different product. They tend to be newer, with separate utilities and garages, and they rent to families and professionals. Prices per unit can be lower than on the isthmus, and taxes depend on the municipality, so a Fitchburg or Sun Prairie side-by-side can sometimes clear 1.0x where an older city two-flat cannot.
Madison's zoning code sets how many units are allowed in each residential district, and the city has adjusted its rules in recent years to make some small multi-unit housing easier. Do not assume an attic or basement unit is legal because it is rented. Check the zoning district and the city's records for the legal unit count, and ask the seller for permits on any conversion.
Lenders and appraisers count legal units. An unpermitted third unit may not be counted in the rent.
This example is illustrative and not a quote. Compare two east side buildings. A $540,000 up-down duplex rents for $3,300 a month. At 75% LTV the loan is $405,000, estimated principal and interest is about $2,832, and with $870 in taxes and $160 in insurance the payment is about $3,862. DSCR is about 0.85x, well short of 1.0x.
A $520,000 triplex with three units at $1,450 rents for $4,350. At 70% LTV the loan is $364,000, estimated principal and interest is about $2,545, and with $820 in taxes and $180 in insurance the payment is about $3,545. DSCR is about 1.23x.
The triplex costs less, uses less leverage and still clears the standard minimum, because the third unit adds rent without adding much tax or insurance. That is a pattern Madison investors see often.
| Item | East side duplex | East side triplex |
|---|---|---|
| Price | $540,000 | $520,000 |
| Loan | $405,000 (75%) | $364,000 (70%) |
| Estimated principal and interest | $2,832 | $2,545 |
| Taxes and insurance | $1,030 | $1,000 |
| Total payment | $3,862 | $3,545 |
| Monthly rent | $3,300 | $4,350 |
| DSCR | About 0.85x | About 1.23x |
Madison rents are solid for a Midwestern city, but property taxes are high, and older city buildings can carry a heavy bill. Use the current tax bill and ask whether a reassessment is due. In many cases, a duplex at a full price will need a sub-1.0 DSCR program, a larger down payment or a building with more units.
Budget for utilities too. Many older flats share a water meter or heat, and if the owner pays, that cost comes out of your cash flow.
Wisconsin's landlord-tenant rules, including the state's rules on security deposits and rental agreements, apply to every unit, and the City of Madison has its own local requirements for rental housing. Read them before you set up leases, especially if you plan to turn units over to new tenants after purchase.
Most Madison 2-4 unit buildings were built well before 1978, so lead paint disclosure rules apply. Look closely at roofs, porches, basement moisture, electrical service and heating systems. Insurers will ask about roof age and wiring.
Wisconsin winters are hard on old buildings. Ice dams, frozen pipes in unheated porches and aging boilers are common repair items, and a building with one shared boiler means one failure affects every tenant. Get a heating system inspection and budget for replacement if the equipment is near the end of its life. Ask for recent utility bills too, since heating costs tell you a lot about insulation and windows.
A 5 to 8 unit building is still residential for our programs, but max LTV can be lower and the review is more detailed. Madison has plenty of small apartment buildings near campus and on the east side; see our Madison 5-8 unit page.
Some investors start with a duplex and later trade up. If you own several Madison 2-4 unit buildings, a blanket portfolio loan can put five or more of them under one payment.
Our DSCR loans offer 30-year terms, purchase up to 80% LTV, cash-out up to 75% LTV and a 620 minimum credit score. The combined rent from every legal unit counts, using leases or market rent. Sub-1.0 DSCR programs exist for buildings that fall a little short, and cash-out seasoning varies by program if you plan to refinance after buying.
Rate-and-term refinances go up to 80% LTV on some programs, which can help an investor who bought with a short-term loan and has now stabilized the building.
Send the address, price and unit rents through the form below, or call (877) 298-1001. We will show the ratio at a few loan amounts and, if the building falls short, what down payment or program would make it work. Have the current leases and tax bill handy if you own it already.
Yes. Duplexes, triplexes and fourplexes qualify on combined rent of all units, with no W-2s or tax returns.
Yes, if the leases are in place or the appraiser supports the rent. Many campus-area units lease August to August.
It may not count. Lenders use the legal unit count, so confirm with city records.
Usually high taxes against rent at a full price. Lower leverage, a sub-1.0 program or a third unit can help.
$150,000, with no stated maximum.
Yes. LLC borrowers are standard.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
Sometimes. Newer side-by-sides in Fitchburg or Sun Prairie can carry lower taxes relative to rent, but every building has to be run on its own numbers.
2-3 competing quotes from 30+ capital sources. No credit pull. No commitment.
By clicking, you provide express written consent to be contacted by LendingStreet (NMLS #1734316) via SMS, phone, or email, possibly using automated technology, regarding your loan inquiry. Reply STOP to opt out. Consent is not required to obtain services. See our Privacy Policy and Terms.