Detroit has a large stock of 1920s brick apartment buildings at low prices per unit. The number that most often surprises investors is the tax bill: Michigan uncaps taxable value when a property sells, so the buyer's bill can be far higher than the seller's.
In short: LendingStreet finances 5 to 8 unit rental buildings in Detroit with DSCR loans that qualify on the building's rent, with no W-2s or tax returns and LLC borrowers standard. Loans start at $150,000 with no stated maximum and the standard minimum DSCR is 1.0x. In Detroit, we size the loan on the post-sale tax bill, not the seller's, and check the city's rental certificate of compliance.
Midtown, Woodbridge and Corktown have brick walk-ups and large houses divided into units near Wayne State, the Detroit Medical Center and downtown. The East Side neighborhoods of West Village, Indian Village and Jefferson-Chalmers have 1920s apartment buildings near the river. On the west side, the University District, Bagley and Palmer Park have brick buildings at varying prices.
Palmer Park in particular has a historic concentration of 1920s apartment buildings, though many are larger than eight units.
Building condition varies widely, even on the same block.
| Area | Typical 5-8 unit stock | What to check |
|---|---|---|
| Midtown, Woodbridge, Corktown | Walk-ups and divided houses | Rising prices, parking |
| West Village, Indian Village | 1920s brick apartment buildings | Historic district rules |
| Jefferson-Chalmers | Older buildings near the river | Flood risk |
| University District, Bagley, Palmer Park | Brick walk-ups | Condition, unit count |
A DSCR loan on a five to eight unit building qualifies on the building's rent, not your income. We add up the leases or market rents for every unit and divide by the full monthly payment: principal, interest, property taxes, insurance and any association dues. The standard minimum is 1.0x, and sub-1.0 programs exist for buildings that fall a little short.
We treat 1 to 8 units as residential, so a six-family is underwritten as a rental, not as a commercial deal. Purchases go up to 80% LTV on some programs, but maximum leverage on 5-8 units is often lower and varies by program and loan size. Cash-out refinances go up to 75% LTV. Loans start at $150,000 with no stated maximum, 30-year terms are available and the minimum credit score is 620. Buildings with nine or more units move to our multifamily program.
Detroit rents are moderate, so the tax and insurance lines carry a lot of weight. We use actual leases and an appraiser's market rent estimate for vacant units.
Under Michigan's Proposal A, taxable value can only rise by a small amount each year while a property is owned, even if market value climbs. When the property sells, taxable value uncaps and resets toward half of market value. On a building held for years, the new owner's bill can be a large multiple of the old one.
Detroit also has one of the highest millage rates in Michigan, and the principal residence exemption only applies to owner-occupants, so rentals pay additional school operating millage. Michigan's state and county transfer taxes are customarily paid by the seller.
Detroit requires rental properties to be registered and to obtain a certificate of compliance, which involves an inspection and, for older buildings, lead clearance. Without a certificate, owners can face fines and limits on collecting rent. Ask the seller for the certificate and inspection history.
Michigan does not allow local rent control. Detroit has added tenant protections, including a right to counsel in eviction cases for many tenants.
This example is illustrative and not a quote. An investor buys an 8-unit brick building in West Village for $800,000. The units rent for about $1,050 each, or $8,400 a month. The seller, who owned the building for many years, paid about $1,300 a month in taxes. After uncapping, taxes are estimated at $2,700 a month. Insurance is $700.
Using the seller's tax bill at 75% LTV, the loan is $600,000. On a 30-year fixed, principal and interest is about $4,195, the full payment with taxes and insurance is about $6,195, and DSCR is about 1.36x. Using the uncapped tax estimate at 75% LTV, the loan is $600,000, principal and interest is about $4,195, the payment is about $7,595 and DSCR is about 1.11x. At 70% LTV with the uncapped estimate, the loan is $560,000, principal and interest is about $3,916, the payment is about $7,316 and DSCR is about 1.15x.
The ratio drops sharply once the realistic tax is used, though it still clears 1.0x here. Using the seller's bill would have overstated the margin. The 70% loan needs about $40,000 more at closing for a little more room.
| Item | 75% LTV, seller tax | 75% LTV, uncapped tax | 70% LTV, uncapped tax |
|---|---|---|---|
| Gross monthly rent | $8,400 | $8,400 | $8,400 |
| Loan amount | $600,000 | $600,000 | $560,000 |
| Principal and interest | $4,195 | $4,195 | $3,916 |
| Property taxes | $1,300 | $2,700 | $2,700 |
| Insurance | $700 | $700 | $700 |
| Total monthly payment | $6,195 | $7,595 | $7,316 |
| DSCR | About 1.36x | About 1.11x | About 1.15x |
Older Detroit buildings often need roof, masonry, plumbing and electrical work, and some have been vacant for periods. Heavy storms in recent years have flooded basements in parts of the city, and Jefferson-Chalmers sits close to the river.
A complete package gets a faster and clearer answer. Most 5-8 unit files need the following.
Our investor loans are business-purpose loans on non-owner-occupied property. We finance DSCR loans on 5-8 unit rentals across Detroit and Wayne County, including Hamtramck.
Send the address, price, rent roll and target leverage through the form below, or call (877) 298-1001. We run the ratio on a realistic tax and insurance figure at a few loan amounts and come back with options. If the building needs work before it can qualify on rent, a bridge loan first and a DSCR refinance after is a common path.
When a Michigan property sells, its taxable value resets toward half of market value. The new owner's bill can be much higher than the seller's, so budget on the post-sale estimate.
Yes. Detroit requires rental registration and a certificate of compliance, which includes an inspection and lead clearance for older buildings.
Yes. Rentals do not get the principal residence exemption, so they pay additional school operating millage.
Residential. We treat buildings of 1 to 8 units as residential and finance them with DSCR loans that qualify on rent. Buildings with nine or more units move to commercial multifamily financing.
At least 20%, and often more. Purchases go up to 80% LTV on some programs, but maximum leverage on 5-8 units is often lower and varies by program, loan size and the building's ratio.
There are options. A lower loan amount raises the ratio, sub-1.0 DSCR programs exist for buildings that are close, and rents that are below market can sometimes be addressed at lease renewal before a refinance.
Usually not right away. A building with major repairs or many vacancies often starts on a short-term bridge loan, then refinances into a DSCR loan once units are rented and the ratio works.
No. Our investor loans are business-purpose loans on non-owner-occupied property, so the building you finance with us cannot be your home.
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