Birmingham's small apartment buildings are concentrated on Southside and in older neighborhoods like Highland Park, Avondale and Crestwood. Alabama is known for low property taxes, but rentals are taxed at twice the assessment ratio of homes their owners live in, and that shows up in the ratio.
In short: Yes, LendingStreet finances 5 to 8 unit rental buildings in Birmingham 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, the standard minimum DSCR is 1.0x and maximum LTV on 5-8 units varies by program. In Birmingham, check the Class II tax assessment on rentals, the building's age and condition, and storm exposure.
Southside and Highland Park have early 1900s brick apartment buildings and large houses divided into units, close to UAB and the hospital district. Avondale, Crestwood and Forest Park on the east side have smaller buildings and fourplexes.
Homewood, Mountain Brook and Vestavia Hills, over Red Mountain, have small apartment buildings at higher prices, while neighborhoods west and north of downtown have lower prices and more renovation work.
Lakeview and the Southside blocks near the hospitals hold most of the brick courtyard buildings, many with original hardwood floors and radiators and with parking that was added later on what used to be yard space.
| Area | Typical building | What to check |
|---|---|---|
| Southside, Highland Park | Early-1900s brick buildings | UAB demand, parking, old systems |
| Avondale, Crestwood, Forest Park | Smaller buildings, fourplexes | Renovation quality, rent support |
| Homewood | Small apartment buildings | Higher prices, school district appeal |
Our residential programs cover one to eight units, so a six or eight unit building in Birmingham is underwritten much like a fourplex, only with more rent and more units to document. Properties with nine or more units are commercial and are handled separately on our commercial programs.
Qualification runs on the property's rent, not your income: no W-2s, no tax returns, LLC ownership allowed. Loans start at $150,000 with no stated maximum, the minimum credit score is 620 and standard programs look for a DSCR of at least 1.0x. Purchases can go up to 80% LTV on some programs and cash-out up to 75%, but 5-8 unit buildings often get lower maximums; it varies by program.
Buildings that need major work before they can be leased are often financed first with a bridge or rehab loan, then refinanced into a DSCR loan once the units are rented. Seasoning for that refinance varies by program, so plan the timing before you buy.
Alabama's property taxes are low for homeowners, but rental property is Class II, assessed at a 20% assessment ratio, compared with 10% for a home the owner lives in. Make sure the tax bill you use reflects Class II, not the seller's homestead classification.
Alabama charges a deed tax of $0.50 per $500 of value and a mortgage recording tax of $0.15 per $100 of the loan amount. Include both in your closing costs.
Check with the City of Birmingham and any suburb you buy in for rental and code requirements. Confirm the legal unit count, especially in older houses that were divided into apartments.
Alabama follows the Uniform Residential Landlord and Tenant Act, which sets basic rules for leases and deposits.
This example is illustrative and not a quote. Picture a 6-unit brick apartment building in Highland Park priced at $700,000. With units averaging $1,000, the building brings in $6,000 a month. The budget uses $780 a month for taxes and $420 for insurance.
At 75% LTV the loan is $525,000, estimated principal and interest is about $3,671 and the total payment is about $4,871, for a DSCR of about 1.23x. At 70% LTV the loan drops to $490,000, the total payment to about $4,626 and the DSCR rises to about 1.30x. Class II taxation roughly doubles the tax line compared with an owner-occupant's bill, so do not budget on the seller's figure.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Loan amount | $525,000 | $490,000 |
| Gross monthly rent | $6,000 | $6,000 |
| Estimated principal and interest | $3,671 | $3,426 |
| Property taxes | $780 | $780 |
| Insurance | $420 | $420 |
| Total monthly payment | $4,871 | $4,626 |
| DSCR | About 1.23x | About 1.30x |
On a five to eight unit building, the appraiser usually looks at comparable small-building sales and at the income the units produce. The rent used for the ratio comes from current leases and a market rent estimate for each unit, and the lower of the two figures is often what counts.
That makes a clean rent roll worth the effort. List every unit, its rent, its lease dates and any concessions, and be ready to explain units that are vacant or leased below market.
Central Alabama is in a tornado-prone area, and severe spring storms are common. Insurers price that risk, and older roofs can raise premiums or limit carriers.
Some areas along Village Creek and Valley Creek are in mapped flood zones. Check before you make an offer.
UAB is the largest employer in the state and anchors demand on Southside. Banking, health care and the growing downtown add more renters.
Prices are moderate, so many five to eight unit buildings in Birmingham fall between $400,000 and $900,000, and the ratio often clears 1.0x when the tax line is budgeted on Class II.
Downtown's revival, with new residential conversions and the area around Railroad Park and Regions Field, has helped push rents in Southside and Highland Park. Buildings farther out can be cheaper but may need more work.
Before you apply, pull together the paperwork that shows the building's income and costs. Then send it through the form below or call (877) 298-1001.
Our investor loans are business-purpose loans on non-owner-occupied property, and LendingStreet reviews each building on its own rent and costs. Share the rent roll, taxes and insurance quote, and the team will show you how the ratio changes at different loan amounts.
Alabama taxes rentals as Class II at a 20% assessment ratio, compared with 10% for owner-occupied homes.
Alabama's mortgage recording tax is $0.15 per $100 of the loan amount, paid at closing.
Yes, if the building has 5 to 8 units and the rent supports the payment.
It depends on the building. Class II taxes on a rental run about twice an owner-occupant's bill, and storm risk keeps premiums meaningful, so get both figures before you make an offer.
Yes. Cash-out goes up to 75% LTV on some programs, often lower on 5-8 units, and seasoning varies by program.
Underwriting looks at leases and market rent for each unit. A vacant unit may be counted at market rent on some programs, but documented leases help.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
On our programs, buildings with up to 8 units are residential. Nine or more units is commercial financing.
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