Des Moines has a good number of small apartment buildings: brick walk-ups from the early 1900s near Drake and downtown, and 1960s and 1970s eight-plexes in the inner suburbs. They fall in the gap between a fourplex and a commercial apartment loan, and DSCR financing covers them as residential property.
In short: LendingStreet finances 5 to 8 unit residential buildings in the Des Moines metro with DSCR loans that qualify on the building's combined rent, with no tax returns and LLC borrowers standard. Loans start at $150,000, the standard minimum DSCR is 1.0x, and maximum LTV on 5-8 units varies by program and is often lower than on a single-family rental. Buildings with 9 or more units are commercial.
Most residential loan programs stop at four units, and most commercial apartment loans are built for larger properties. A six-unit building in Des Moines can end up stuck between the two. Our DSCR program treats 5 to 8 units as residential, qualifies the loan on rent, and does not require a full commercial underwriting package.
The tradeoff is that maximum LTV can be lower and reserve requirements higher than on a single-family home. The exact numbers vary by program.
Many local banks will finance a building like this, but often on shorter terms with a balloon and with a review of your personal income. A 30-year DSCR loan avoids the balloon and keeps the focus on the building.
Small apartment buildings are spread across the metro, but they cluster in a few areas.
Location inside these areas matters. Buildings close to Drake University, the downtown job base and bus lines on main corridors such as University Avenue and Ingersoll Avenue tend to lease faster than those on quieter side streets far from services.
Parking can also come up. Some older buildings were built with little or no off-street parking, which can matter to tenants and to any change you plan to the property.
| Area | Typical building | Notes |
|---|---|---|
| Drake and Sherman Hill | Early 1900s brick walk-ups, large converted houses | Older systems; historic district rules in Sherman Hill |
| Downtown edges, River Bend | Brick buildings with 6 to 8 units | Check parking and egress |
| Highland Park, south side | Smaller buildings at lower prices | Condition varies widely |
| Urbandale, Windsor Heights, West Des Moines | 1960s-1970s eight-plexes | Flat roofs, original windows, shared laundry |
This example is illustrative and not a quote. An investor buys a six-unit brick building near Drake for $585,000. Each unit rents for $875, for $5,250 a month. Taxes are budgeted at $700 a month and insurance at $300.
At 70% LTV the loan is $409,500 and estimated principal and interest is about $2,794. The total payment is about $3,794, for a DSCR of about 1.38x. At 75% LTV, if the program allows it, the loan is $438,750, the payment about $3,993 and DSCR about 1.31x.
| Item | 70% LTV | 75% LTV |
|---|---|---|
| Loan amount | $409,500 | $438,750 |
| Estimated principal and interest | $2,794 | $2,993 |
| Taxes and insurance | $1,000 | $1,000 |
| Total payment | $3,794 | $3,993 |
| DSCR at $5,250 rent | About 1.38x | About 1.31x |
On 5-8 unit buildings, the appraiser looks at sales of similar small apartment buildings and at the rent roll. In Des Moines, true comparable sales can be thin, so the appraiser may reach across neighborhoods or use the income approach more heavily.
Have a rent roll with move-in dates, current leases and a year of operating history if you are refinancing. Expect reserve requirements to be higher than on a house.
Insurance on older brick buildings can also be a surprise. Carriers look at roof age, wiring and fire separation between units, and some want updates before they will write a policy. Get a quote early.
Small buildings often come with informal leases, month-to-month tenants and rents below market, especially when a long-time owner is selling. That can be an opportunity, but the loan is sized on rent in place or a supportable market rent, not on what you plan to charge after renovations.
If rents are well below market, a bridge loan to renovate units and reset rents, followed by a DSCR refinance, can produce a larger permanent loan than financing the building as-is.
Older brick buildings often have a single boiler and one water meter, so the owner pays heat and water for every unit. Those costs are not in the DSCR formula, but they are real. Newer eight-plexes often have separate furnaces and electric meters, which shifts more cost to tenants.
Know the utility setup before you make an offer, and get a year of bills from the seller. Iowa winters make heating costs a big line in a master-metered building.
Owner-paid heat and water are not in the formula, so a building that shows a strong ratio on paper can still be tight on cash. Run a full operating budget alongside the DSCR before you commit.
In the city of Des Moines, every rental unit needs to be covered by a rental certificate. In multi-unit buildings, inspectors also look at shared items such as fire separation, exit stairs, hallway lighting and smoke detection. A building with deferred maintenance can have a long repair list, so ask for the certificate and any open orders before closing.
Plan for repairs on items the city flags, such as fire doors, self-closing hardware and exit signage, and allow time for a reinspection before new tenants move in.
If the building has nine or more units, it is a commercial property; see our multifamily loans page. For two- to four-unit properties, see our duplex and fourplex guides.
A building that sits on a large lot or next to commercial uses may raise zoning questions, so check that the current number of units is allowed.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the address, price, rent roll and utility setup through the form below, or call (877) 298-1001. See our Iowa 5-8 unit page for buildings elsewhere in the state.
We will run the ratio at a couple of leverage levels and tell you what reserves to plan for.
For our DSCR program, buildings with 5 to 8 units are residential. Nine or more units is commercial.
It varies by program and is often lower than on a single-family rental. We will show you the options for your building.
Total monthly rent from all units divided by the monthly payment: principal and interest, taxes, insurance and any HOA dues.
They are not part of the DSCR formula, but they affect your cash flow. Get a year of utility bills before you buy.
No. The loan qualifies on the building's rent.
A building with vacancies may fit a bridge loan first, then a DSCR refinance once leased.
In the city of Des Moines, yes. Ask the seller for the certificate and any open violations.
With five or more properties, a blanket portfolio loan may fit.
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