California has more 5 to 8 unit buildings than almost anywhere, from Los Angeles dingbats to Bay Area Victorians split into flats. Prices are high relative to rents, so the DSCR math is tighter here and leverage is often the lever that makes a deal work.
In short: Yes. LendingStreet finances 5 to 8 unit rental buildings in California 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. In California, high prices, rent-increase limits, transfer taxes and wildfire insurance mean many 5-8 unit buildings qualify at lower leverage than the program maximum.
Los Angeles has thousands of small apartment buildings, including the 1950s and 1960s stucco dingbats with tuck-under parking found across the Valley, Palms, Mid-City and Long Beach. San Diego has similar buildings in North Park, Hillcrest and City Heights, and the Inland Empire has newer garden-style small buildings at lower prices.
In San Francisco and Oakland, many 5 to 8 unit properties are older wood-frame buildings split into flats. Sacramento, Fresno and Bakersfield offer lower prices and often better rent-to-price ratios, which is why many California investors look inland for small multifamily.
LendingStreet treats 1 to 8 units as residential, so a five-, six-, seven- or eight-unit building in California 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. Coastal California has frequent small-building sales, but rent-controlled buildings and buildings with long-term below-market tenants can appraise differently, so the appraiser's rent analysis matters.
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.
Under Proposition 13, a building is reassessed to its purchase price when it sells, at a base rate of about 1% plus local bonds and assessments. The seller's old tax bill is almost never the right number; budget taxes from your price.
Counties charge a documentary transfer tax, and many cities add their own, which can be much higher. Los Angeles adds a separate tax on sales above a high price threshold. Ask your escrow officer for the exact transfer taxes for your city.
California insurance has become harder to place as major carriers have limited new policies, and some buildings end up on the FAIR Plan with a separate policy to fill gaps. Wildfire-adjacent areas see the highest quotes. Get a firm quote before you go to contract.
Earthquake coverage is usually a separate decision. Los Angeles, San Francisco and some other cities have mandatory soft-story retrofit programs for older wood-frame buildings with tuck-under parking, so ask whether the work is done and permitted.
This example is illustrative and not a quote. An investor buys a Los Angeles-area six-unit building for $1,900,000. Each of the 6 units rents for $2,350 a month, for $14,100 in total. Property taxes are budgeted at $22,800 a year and the whole-building insurance quote is $14,400 a year.
At 65% LTV the loan is $1,235,000, leaving $665,000 down before closing costs. On 30-year amortization, principal and interest is about $8,635 a month. Adding $3,100 for taxes and insurance brings the payment to about $11,735, so the DSCR is about 1.20x, above the 1.0x standard minimum. At 75% LTV the loan would be $1,425,000 and the ratio would drop to about 1.08x, which shows why buyers here often bring a larger down payment.
| Item | Amount |
|---|---|
| Purchase price | $1,900,000 |
| Units and gross monthly rent | 6 units, $14,100 |
| Loan at 65% LTV | $1,235,000 |
| Principal and interest (30-year) | About $8,635 |
| Taxes and insurance per month | About $3,100 |
| Total monthly payment | About $11,735 |
| DSCR | About 1.20x |
The statewide Tenant Protection Act caps annual increases on many older buildings and requires just cause for many evictions. Los Angeles, San Francisco, Oakland and other cities have stricter local rent control on older buildings. Underwriting uses the rents you can actually collect, so in-place leases matter more than market rent.
If units are well below market under rent control, the DSCR is based on those rents. Price the building on what it earns today, not what it might earn after turnover.
Having these together before you apply keeps the appraisal and underwriting on schedule.
These loans fit investors in California 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 California 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.
Program maximums can allow it, but California prices are often high relative to rents, so the ratio may only work at lower leverage. Many buyers put down 30% to 40% on coastal buildings.
Yes. The ratio is based on rent you can collect. If units are under local rent control or the statewide cap at below-market rents, those in-place rents are what the loan is sized on.
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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