Five- to eight-unit buildings are a small slice of Chattanooga's housing, mostly older brick walk-ups and converted houses near downtown. They sit in a useful gap: too big for a typical home loan, but small enough to finance as residential rather than commercial.
In short: LendingStreet finances 5 to 8 unit residential buildings in the Chattanooga area with DSCR loans that qualify on the combined rent of all units, not your personal income. Loans start at $150,000 with no stated maximum, the standard minimum DSCR is 1.0x, the minimum credit score is 620 and LLC borrowers are standard. Max LTV on 5-8 unit properties can be lower than on 1-4 units and varies by program.
Most small apartment buildings in the city are in the older neighborhoods around downtown: Highland Park, Fort Wood near UTC, North Chattanooga, Riverview, Glenwood and St. Elmo. You will find 1920s and 1930s brick buildings with six or eight units, large Victorian or four-square homes split into five or six apartments, and some 1960s and 1970s two-story garden buildings along older corridors such as Brainerd Road.
Newer construction in this size range shows up in the Southside, MLK and the edges of downtown, where form-based zoning allows small multi-unit buildings on infill lots.
Tenant demand comes from several directions at once: students and staff at UTC, nurses and staff at Erlanger and the other hospital campuses, downtown office and hospitality workers, and young professionals who want to walk to the North Shore or Main Street. Units with off-street parking and in-unit laundry tend to lease fastest.
We add up the rent on every unit and compare it to the building's full monthly payment: principal and interest, taxes, insurance and any HOA dues. The appraiser provides a rent schedule and, on many programs, a rent roll and leases are reviewed. Vacant units are usually counted at market rent with support from comparable rentals, though some programs limit how much vacancy they accept.
Because the building is still residential, you avoid the full commercial loan process, but expect more review than on a single house: a more detailed appraisal, a look at the rent roll and sometimes higher reserves.
This example is illustrative and not a quote. An investor buys a six-unit brick building for $780,000. Each unit rents for about $1,075, for combined rent of $6,450 a month. Taxes are budgeted at $640 a month and insurance at $340.
At 75% LTV the loan is $585,000. Estimated principal and interest on a 30-year term is about $4,040, for a total payment of about $5,020 and a DSCR of about 1.28x. At 70% LTV, the loan is $546,000, the payment about $4,751 and the DSCR about 1.36x.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Loan amount | $585,000 | $546,000 |
| Estimated principal and interest | $4,040 | $3,771 |
| Taxes | $640 | $640 |
| Insurance | $340 | $340 |
| Total monthly payment | $5,020 | $4,751 |
| DSCR at $6,450 combined rent | About 1.28x | About 1.36x |
Tennessee assesses property at different assessment ratios depending on how it is classified, and single-family homes are generally assessed as residential. Before you rely on a tax estimate for a multi-unit building, ask the Hamilton County Assessor of Property how the parcel is classified and pull the actual bill from the county trustee and, inside city limits, the City of Chattanooga. Using the seller's bill after a recent reappraisal can understate the payment.
Many Chattanooga walk-ups are close to a century old. Inspectors look at roofs, masonry, porches and stairs, fire separation between units, electrical service and whether each unit is separately metered. Shared boilers or a single water meter put those utility costs on the owner, which affects cash flow even though they are not part of the DSCR payment.
Insurance on a five- to eight-unit building is often written differently than a landlord policy on a house, and premiums reflect age, construction and claims history. Ask for a quote early, confirm liability limits and check whether the policy covers loss of rents. Buildings in mapped flood areas near the Tennessee River or Chattanooga Creek will need flood coverage.
Some older Chattanooga buildings have more units than current zoning would allow on the lot. They may be legal nonconforming uses, which is usually fine, but the appraiser and title review will look at whether the building could be rebuilt after a loss. Ask the city for a zoning verification letter if there is any question.
Converted houses deserve the same check. A large home split into apartments decades ago may or may not have permits for every unit, and an unpermitted unit can change both the rent the appraiser will count and the value.
Nine or more units is commercial financing, handled through our multifamily loans page. If you own several smaller buildings, a blanket portfolio loan can combine five or more properties under one loan.
We lend on 5-8 unit buildings across Hamilton County, including Red Bank, East Ridge and Hixson, though most buildings this size are in the older city neighborhoods.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the address, price, rent roll, leases and an insurance quote through the form below, or call (877) 298-1001. For statewide context, see our Tennessee 5-8 unit DSCR page.
For our programs, 5 to 8 units is residential and financed with a DSCR loan. Nine or more units is commercial.
It varies by program and is often lower than on 1-4 units. Purchases go up to 80% LTV on standard DSCR programs, with 5-8 unit limits typically below that.
Usually at market rent supported by the appraiser's rent schedule, though some programs limit vacancy. A current rent roll and leases help.
No personal income is used. We review the rent roll, leases, appraisal and your credit, with a 620 minimum score.
Owner-paid utilities are not part of the DSCR payment, which covers principal, interest, taxes, insurance and HOA dues. They still affect your real cash flow.
Yes, if the units are legal and the building meets the program's property requirements. A zoning letter helps when the unit count is in question.
Tennessee's residential landlord and tenant rules apply to apartment units as they do to houses. Check current state law and any local codes for notice, deposit and maintenance requirements.
Yes. Rate-and-term and cash-out refinances are available, with leverage that varies by program.
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