Duluth's older neighborhoods are full of small apartment buildings: brick walk-ups from the early 1900s on the East Hillside, big houses near the colleges divided into five or six units, and plain postwar sixplexes in West Duluth. At 5 to 8 units, they qualify as residential for our DSCR loans.
In short: LendingStreet finances 5-8 unit residential buildings in Duluth with DSCR loans that qualify on the combined rent of every unit, with no personal tax returns and LLC borrowers standard. Loans start at $150,000 with no stated maximum, and max LTV on 5-8 units varies by program and can be lower than on smaller properties. Because these buildings are often old, licensing, heating systems and insurance carry extra weight in Duluth underwriting.
The East and Central Hillside have the largest concentration of brick walk-ups and converted buildings, close to downtown, the medical district and bus lines. Near UMD and St. Scholastica, Endion, Chester Park and Kenwood have large older homes split into several units for students. West Duluth, from Lincoln Park to Denfeld, has simpler postwar buildings with lower prices.
Prices on 5-8 unit buildings in Duluth are modest compared with the Twin Cities, so the per-unit cost is often attractive, but repairs on old buildings can be large.
| Building type | Where common | What to inspect |
|---|---|---|
| Early 1900s brick walk-up | East and Central Hillside | Boiler, masonry, roof, fire escapes |
| Converted large house | Endion, Chester Park, Kenwood | Legal unit count, egress, fire separation |
| Postwar sixplex | Lincoln Park, West End, Denfeld | Separate heat, windows, parking |
Every unit in a Duluth rental building should be covered by the city's rental license, and the unit count must be legal. Some converted houses have an extra apartment added in an attic or basement without approval. An unlicensed or unpermitted unit cannot be counted toward the rent used for the loan, and it can create problems with insurance and the city. Ask the seller for the license and the last inspection report, and check that the number of units on paper matches the number of mailboxes.
This example is illustrative and not a quote. An investor buys a brick sixplex on the East Hillside for $560,000. Each unit rents for $1,000, for $6,000 a month in total. St. Louis County taxes are budgeted at $750 a month and insurance at $400.
At 75% LTV the loan is $420,000. Estimated principal and interest is about $2,901, the total payment is about $4,051 and the DSCR is about 1.48x. A strong ratio like this leaves room for the lower leverage some programs require on 5-8 unit buildings, and for owner-paid heat, which does not enter the DSCR formula.
The same building with owner-paid heat might spend several hundred dollars a month on gas in January. That cost does not change the DSCR, but it reduces the cash left after the payment, which is why a strong ratio on paper is not the whole story for an old Duluth walk-up.
| Item | Monthly amount |
|---|---|
| Rent (6 units at $1,000) | $6,000 |
| Estimated principal and interest | $2,901 |
| Property taxes | $750 |
| Insurance | $400 |
| Total payment | $4,051 |
| DSCR | About 1.48x |
Most older Duluth walk-ups have a central boiler and owner-paid heat. In a city with long winters off Lake Superior, that is one of the largest operating costs. DSCR covers principal, interest, taxes, insurance and any HOA, so heat, water, snow removal and common-area costs come out of the remaining cash flow. Budget them carefully.
Ask for a year of utility bills, the boiler's age and service history and any records of frozen pipes or water damage.
Minnesota classifies apartment buildings differently from single-family and small multi-unit rentals, so a five-unit building may carry a different tax burden than a fourplex of similar value. Use the current St. Louis County tax statement and ask whether a recent sale or renovation will trigger a new value.
Assessments can also change after a large renovation. If you plan to modernize units, update the boiler or add value in other ways, ask how the county is likely to treat the property at the next valuation date, and budget for a higher bill when you set rents.
Converted buildings near UMD and St. Scholastica can produce strong rent per unit, but they turn over on the school calendar and often see heavier wear. Underwriters look at the rent roll at the time you apply, so a building with next year's leases already signed presents better than one with leases ending in a few weeks. Confirm occupancy limits under the rental license for each unit.
Our residential DSCR program covers buildings up to 8 units. For a 9-unit or larger Duluth building, see our multifamily loans page. Our investor loans are business-purpose loans on non-owner-occupied property.
Many investors move up to a 5-8 unit building after owning a few duplexes. Each DSCR loan qualifies on its own rent, so existing properties do not limit your next purchase. A local property manager who knows Duluth's licensing and student leasing cycle can strengthen your file if this is your first building of this size.
A building of this size also deserves a written maintenance plan. Old masonry needs mortar repair, fire escapes need inspection and roofs on flat or low-slope buildings need regular attention under heavy snow. Showing an underwriter that you know these costs, and have reserves for them, makes a better impression than a rent roll alone.
Send the address, price, rent roll, utility bills and rental license through the form below or call (877) 298-1001. We will confirm the leverage available and run the ratio. See also our Minnesota 5-8 unit page.
For our DSCR program, yes. Buildings with 5 to 8 units are residential; nine or more units is commercial. That keeps the loan in residential underwriting, which is usually simpler than a commercial apartment loan.
It varies by program and can be lower than on 1-4 unit properties.
No. DSCR uses principal, interest, taxes, insurance and any HOA, but utilities affect your cash flow, so budget them. Ask for the operating history along with the rent roll.
Only if it is legal and covered by the rental license. An unlicensed unit can also cause problems with insurance and the city.
No. The loan qualifies on the combined rent of the building.
They can qualify. Signed leases for the coming school year help. Check occupancy limits on each unit's license as well.
Yes. LLC borrowers are standard, and you sign for the loan personally.
Not under this program. Buildings with nine or more units are commercial loans.
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