Arizona's small apartment buildings are mostly concrete block and stucco walk-ups from the 1950s through the 1980s, tucked into central Phoenix, Tempe, Mesa and Tucson. They can be strong DSCR candidates, provided the rents, roofs and cooling systems hold up to scrutiny.
In short: Yes. LendingStreet finances 5 to 8 unit rental buildings in Arizona with DSCR loans that qualify on the building's rent, starting at $150,000 with no stated maximum and LLC borrowers standard. Purchases can go up to 80% LTV and cash-out up to 75%, though maximum leverage on 5-8 units varies by program. Arizona investors generally face moderate property taxes and fairly low transfer costs, so the rent roll, roof and HVAC condition and the insurance quote usually decide the ratio.
In metro Phoenix, 5 to 8 unit buildings cluster in older neighborhoods around central Phoenix, the Coronado and Encanto areas, south Scottsdale, Tempe near Arizona State University and the older parts of Mesa and Glendale. Many are single-story or two-story block buildings around a courtyard or pool, with individual cooling units and shared laundry.
Tucson has a similar stock near the University of Arizona and along the older corridors east of downtown. Flagstaff has small buildings serving Northern Arizona University, with different weather and higher prices relative to rents.
LendingStreet treats 1 to 8 units as residential, so a five-, six-, seven- or eight-unit building in Arizona is underwritten as a rental property rather than a commercial loan. The loan qualifies on the building's rent: total monthly rent divided by the full monthly payment, including principal, interest, taxes, insurance and any association dues.
Standard programs look for 1.0x or better, and sub-1.0 programs exist for buildings that come up a little short. Maximum leverage on 5-8 unit properties is often lower than on a single-family rental and varies by program and loan size.
A 5 to 8 unit building is usually appraised with more weight on the income approach than a house would be. The appraiser compares its rents with similar small buildings nearby and reconciles that with sales comparables. Phoenix and Tucson have a deep enough small-multifamily market that appraisers can usually find recent 5-8 unit sales nearby, but older buildings with deferred maintenance can still appraise below the asking price.
Underwriting works from the rent roll and the leases. Expect to provide a current rent roll showing each unit, its rent and lease dates, plus copies of the leases. Vacant units are usually counted at the appraiser's market rent, and some programs use the lower of actual and market rent.
Arizona property taxes are moderate, and owner-occupied homes get a state school-tax credit that rentals do not, so a building's bill can differ from a seller's if they lived in a unit. Use the rental classification when you estimate taxes.
Arizona does not impose a large real estate transfer tax; recording and affidavit fees are modest and escrow companies handle most closings. Arizona cities historically charged a transaction privilege tax on residential rent, and state law ended that city tax on residential leases starting in 2025. Confirm the current treatment with your tax adviser.
Arizona buildings do not carry hurricane pricing, but carriers look closely at roof age, especially flat roofs on block buildings, and at the age of cooling units. A building with several failing units will show up in the inspection and sometimes in the appraisal.
Monsoon storms bring wind, hail and localized flooding, and some parcels near washes sit in flood zones. Get a current whole-building quote and confirm whether flood coverage will be required.
This example is illustrative and not a quote. An investor buys a central Phoenix eight-unit block building for $1,200,000. Each of the 8 units rents for $1,250 a month, for $10,000 in total. Property taxes are budgeted at $6,500 a year and the whole-building insurance quote is $8,500 a year.
At 75% LTV the loan is $900,000, leaving $300,000 down before closing costs. On 30-year amortization, principal and interest is about $6,293 a month. Adding $1,250 for taxes and insurance brings the payment to about $7,543, so the DSCR is about 1.33x, above the 1.0x standard minimum. If the appraiser's market rent came in $75 a unit lower than the rent roll and the program used the lower figure, the ratio would be about 1.25x.
| Item | Amount |
|---|---|
| Purchase price | $1,200,000 |
| Units and gross monthly rent | 8 units, $10,000 |
| Loan at 75% LTV | $900,000 |
| Principal and interest (30-year) | About $6,293 |
| Taxes and insurance per month | About $1,250 |
| Total monthly payment | About $7,543 |
| DSCR | About 1.33x |
Arizona's Residential Landlord and Tenant Act governs deposits, notices and repairs, and state law prohibits local rent control. Many small buildings bill water and trash back to tenants; if yours does, underwriting still counts the rent, so keep the utility billing records handy.
State law limits how far cities can restrict short-term rentals, though cities can require permits, registration and local contact information. A furnished 5-8 unit building can sometimes qualify on projected short-term income on some programs.
Having these together before you apply keeps the appraisal and underwriting on schedule.
These loans fit investors in Arizona who want to qualify on the building's income instead of personal tax returns, hold title in an LLC and finance on a 30-year term. Our investor loans are business-purpose loans on non-owner-occupied property, so a building where you plan to live in one of the units is not eligible.
If the building needs heavy renovation or has several vacant units, a short-term bridge loan and a later refinance into a DSCR loan can be the better path. Buildings with nine or more units are commercial; see our multifamily loans page for those. Call (877) 298-1001 or use the form below to get a quote.
Yes. LendingStreet finances 5 to 8 unit investment buildings in Arizona with DSCR loans from $150,000, qualified on the building's rent with LLC borrowers standard.
LendingStreet treats 1 to 8 units as residential, so a 5 to 8 unit building is underwritten as a rental property on its rent. Nine or more units is commercial lending.
State law ended city transaction privilege tax on residential leases beginning in 2025. Confirm the current rules for your property with a tax adviser, since commercial and short-term rental treatment can differ.
Yes. Pools are common on Phoenix-area small apartment buildings. Expect insurers to ask about fencing and safety features, and budget for maintenance, since the pool will not add to qualifying rent.
No. Our investor loans are business-purpose loans on non-owner-occupied property, so the building has to be fully used as a rental.
Vacant units are usually counted at the appraiser's market rent, and some programs use the lower of actual and market rent. Several vacancies can reduce the loan amount, and a bridge loan may be the better first step.
Yes, up to 75% LTV on standard programs, often lower on 5-8 units. The rent still has to cover the new payment, and seasoning rules vary by program.
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