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DSCR · District of Columbia 5-8 Units

Financing 5-8 Unit Rental Buildings in District of Columbia

In Washington, DC, a 5 to 8 unit building is usually a converted rowhouse or a small walk-up in Columbia Heights, Petworth, Capitol Hill or Brookland. The rents are strong. What makes DC different is the paperwork: tenant purchase rights, rent control and high transfer costs.

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In short: Yes. LendingStreet finances 5 to 8 unit rental buildings in the District 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 DC, the Tenant Opportunity to Purchase Act, rent control on many older buildings and combined recordation and transfer taxes are the items that shape the deal and the timeline.

Where investors find 5-8 unit buildings in District of Columbia

DC's small multifamily stock is mostly older: rowhouses converted into flats in Columbia Heights, Mount Pleasant, Petworth and Shaw, and small brick walk-ups in Brookland, Congress Heights, Anacostia and along the Georgia Avenue corridor. Capitol Hill and Dupont Circle have converted townhouses with five or six units at higher prices.

Newer small buildings exist where conversions added units, often called pop-ups, though zoning changes have limited some of those. Most buildings are older, so condition and code compliance matter.

Loan terms for District of Columbia 5-8 unit rentals

LendingStreet treats 1 to 8 units as residential, so a five-, six-, seven- or eight-unit building in District of Columbia 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.

Documenting the income on a 5-8 unit building

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. DC has many small building sales, but rent-controlled buildings, buildings with long-term tenants and vacant buildings can appraise differently, so the rent analysis is central.

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.

DC recordation and transfer taxes

DC charges both a deed recordation tax and a transfer tax on a sale, and on higher-priced buildings the combined rate is among the highest in the region. By custom, the buyer usually pays recordation and the seller pays transfer tax, but contracts vary. These are significant on a 5-8 unit purchase, so confirm with your title company.

DC's residential property tax rate is moderate, but non-owner-occupied property does not receive the homestead deduction. Use the current assessed value for a rental.

Older rowhouse buildings

Insurance in DC is usually more about building age than weather. Carriers ask about wiring, plumbing, roof and fire separation in converted rowhouses.

Some low-lying areas near the Anacostia and Potomac rivers have flood exposure. Get a whole-building quote before you finalize your offer.

A sample District of Columbia deal

This example is illustrative and not a quote. An investor buys a Petworth six-unit converted building for $1,750,000. Each of the 6 units rents for $2,250 a month, for $13,500 in total. Property taxes are budgeted at $14,900 a year and the whole-building insurance quote is $9,000 a year.

At 70% LTV the loan is $1,225,000, leaving $525,000 down before closing costs. On 30-year amortization, principal and interest is about $8,565 a month. Adding $1,992 for taxes and insurance brings the payment to about $10,557, so the DSCR is about 1.28x, above the 1.0x standard minimum. At 75% LTV the loan would be $1,312,500 and the ratio would drop to about 1.21x, which shows why buyers here often bring a larger down payment.

ItemAmount
Purchase price$1,750,000
Units and gross monthly rent6 units, $13,500
Loan at 70% LTV$1,225,000
Principal and interest (30-year)About $8,565
Taxes and insurance per monthAbout $1,992
Total monthly paymentAbout $10,557
DSCRAbout 1.28x

TOPA, rent control and licensing

Under DC's Tenant Opportunity to Purchase Act, tenants in a building have the right to purchase or assign rights before a sale, with notice periods and timelines. On a 5-8 unit purchase, TOPA can add months, so build it into your contract timeline.

Rent control covers many older buildings, and the small-landlord exemption generally applies only to owners of four or fewer units. A Basic Business License is required to rent. Underwriting uses in-place rents.

Before you apply

Having these together before you apply keeps the appraisal and underwriting on schedule.

Is a 5-8 unit DSCR loan right for you?

These loans fit investors in the District 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.

Common questions

Does LendingStreet finance 5 to 8 unit buildings in District of Columbia?

Yes. LendingStreet finances 5 to 8 unit investment buildings in the District with DSCR loans from $150,000, qualified on the building's rent with LLC borrowers standard.

Is a 5-8 unit building residential or commercial?

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.

How does TOPA affect buying a DC building?

Before a sale, tenants must be offered the opportunity to purchase, and the process has notice and response periods. It can add significant time, so plan your financing and rate lock around it.

Is my DC 5-8 unit building under rent control?

Many older DC buildings are, and the small-landlord exemption usually does not cover owners of five or more units. Check registration status with the city; underwriting uses the rents you can collect.

Can I live in one of the units?

No. Our investor loans are business-purpose loans on non-owner-occupied property, so the building has to be fully used as a rental.

What if some units are vacant?

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.

Can I do a cash-out refinance on a 5-8 unit building?

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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