Five- to eight-unit buildings are scarce in Dover compared with single-family rentals, which is part of their appeal. When one comes up near downtown, the university or along the main corridors, it usually has steady tenants and rents below what a new owner can achieve.
In short: LendingStreet finances 5-8 unit residential buildings in Dover and Kent County with DSCR loans that qualify on the combined rent of all units, with no W-2s or tax returns. Loans start at $150,000 with no stated maximum, LLC borrowers are standard and maximum LTV can be lower than on 1-4 unit properties, varying by program. Kent County's modest tax bills help these buildings clear the 1.0x standard minimum.
In the Dover area, small apartment buildings are mostly two-story brick or frame garden-style buildings from the 1960s through the 1980s, plus a few large older homes near downtown divided into apartments. Some sit near Delaware State University and lease to students and staff; others near Route 13 and the state office complexes lease to working tenants.
Milford and Smyrna have a handful of similar buildings. Because these properties trade rarely, sellers are often long-term owners, and the leases and books may need cleanup before a sale.
These buildings tend to have simple layouts: one- and two-bedroom units with separate entrances or a shared stairwell, off-street parking and individual heating and cooling in many cases. That simplicity can keep maintenance predictable once deferred items are handled.
These buildings are still residential in our programs, but the review goes deeper. Expect a closer look at the rent roll, leases, operating history and building condition. Maximum LTV may be lower and reserve requirements may be higher, depending on the program and loan size.
Have 12 months of income and expense history, the current rent roll, copies of leases and a list of capital work. If the seller kept informal records, ask for bank deposits that show rent collection.
| Item | 1-4 unit rental | 5-8 unit building |
|---|---|---|
| Rent used | Lease or market rent | Full rent roll |
| Purchase LTV | Up to 80% | Often lower; varies by program |
| Documents | Leases | Leases, rent roll, operating history |
| Dover examples | Ranches, duplexes | Garden-style apartment buildings |
This example is illustrative and not a quote. An investor buys a six-unit building near Route 13 for $620,000. Each unit rents for $1,000, $6,000 in total. At 75% LTV, the loan is $465,000.
Estimated principal and interest on a 30-year term is about $3,251. Taxes are budgeted at $330 a month and insurance at $380, for a total payment of about $3,961 and a DSCR of about 1.51x. The relatively low Kent County tax line is a big reason the ratio has room above 1.0x.
At 80% leverage, the same building would still clear 1.0x in this example, but many 5-8 unit programs cap leverage lower. Test the ratio at the leverage your program allows.
| Line item | Monthly |
|---|---|
| Rent, six units | $6,000 |
| Estimated principal and interest | $3,251 |
| Taxes | $330 |
| Insurance | $380 |
| Total payment | $3,961 |
| DSCR | About 1.51x |
In older garden buildings, the owner often pays water, sewer and sometimes heat. Inside city limits, electric service comes from the City of Dover's utility; check whether units are separately metered. Owner-paid utilities do not enter the DSCR ratio itself, which uses rent against principal, interest, taxes and insurance, but they reduce real cash flow.
Budget for management, maintenance, trash and common-area costs as well.
Converting owner-paid utilities to tenant-paid by adding separate meters can improve cash flow over time, but it costs money up front and needs to be planned with lease renewals.
Small apartment buildings from this era share common issues. Have an inspector who knows multi-unit buildings look at:
Ask for the age of each HVAC unit and water heater. Replacing several at once is a large expense, and spreading those replacements over a few years should be part of your capital plan.
Inside Dover city limits, rental properties are subject to city licensing and inspection requirements. Confirm each unit is properly licensed and that the number of units matches the city's records. Units that are not legal may not count toward rent.
Outside city limits, Kent County and individual towns have their own rules. Confirm which jurisdiction applies and what it requires for multi-unit rentals before closing.
A building with several vacant units or deferred maintenance may not qualify for a DSCR loan right away. A bridge loan can fund the purchase and repairs, then a DSCR loan can refinance once the units are leased. Delaware's transfer tax applies to the purchase but generally not to the refinance.
If several units are leased well below market, a bridge loan can also give you time to bring rents up at renewal before the DSCR refinance.
Small apartment buildings in Dover draw tenants who want lower rent than a single-family home: younger state and hospital workers, university staff, single service members and retirees. Demand for one- and two-bedroom units tends to be steady because the region's largest employers are government, military and healthcare.
Vacancy still happens. Budget for turnover costs and a month or two of vacancy per unit over time, and keep reserves above any program minimum. Underwriters favor buildings with a history of stable occupancy and documented rent collection.
Send the address, price, rent roll and expense details. Our investor loans are business-purpose loans on non-owner-occupied property. Call (877) 298-1001 or use the form below.
Note any vacant units, owner-paid utilities and recent capital work so we can review the building accurately the first time.
In our programs, 5-8 units are financed as residential DSCR loans. Nine or more units are commercial.
It can be lower than on 1-4 unit properties and varies by program. The DSCR on the payment also limits the loan, though Kent County's modest taxes often leave room above 1.0x.
The DSCR ratio uses rent against principal, interest, taxes, insurance and HOA dues. Utilities still affect your cash flow.
Yes. Leases and a current rent roll are central to underwriting a 5-8 unit building.
Yes, if the units are legal rentals and the rent supports the payment. Student-oriented buildings can see more turnover, so plan reserves for summer vacancies.
Often with a bridge loan first, then a DSCR refinance after lease-up.
No. The loan qualifies on the building's rent. You still need a 620 or higher credit score, reserves and the down payment, and LLC borrowers are standard.
Leases, a current rent roll, 12 months of income and expenses and a list of capital work. Bank deposits can help where records are informal.
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