Durham's five-to-eight-unit buildings are a thin slice of the market: a few 1920s brick apartment houses near Duke's East Campus, some 1960s and 1970s garden buildings scattered through central Durham, and a growing number of new small buildings on infill lots. They rarely list, and when they do, the financing decides who wins.
In short: LendingStreet finances 5 to 8 unit residential buildings in Durham with DSCR loans that qualify on the building's combined rent, not your personal income. Loans start at $150,000 with no stated maximum, the standard minimum DSCR is 1.0x and the minimum credit score is 620. Maximum LTV on 5-8 unit properties can be lower than on 1-4 units and varies by program.
The older stock is concentrated close to downtown and Duke: Trinity Park and the blocks around Ninth Street, Old North Durham, and pockets of Morehead Hill and Burch Avenue. These are usually brick buildings with one- and two-bedroom units, radiator or converted heat, and limited parking.
Newer 5-8 unit buildings are appearing on infill lots where zoning allows small multi-unit residential, and some South Durham properties are townhome-style buildings with five to eight units under one roof. Each type underwrites differently, mostly because of age, insurance and expenses.
On a 5-8 unit building we qualify on the combined rent of all units, verified with a rent roll and leases. Appraisers typically use both comparable sales and an income approach, so the building's actual income and expenses carry more weight than on a single-family home.
Because the property type is a step closer to commercial, maximum LTV can be lower, reserves can be higher, and some programs look harder at your experience managing multiple units. Buildings with 9 or more units are commercial loans; see our multifamily page for those.
| Item | 1-4 units | 5-8 units |
|---|---|---|
| How rent is counted | Lease or market rent per unit | Rent roll and leases for all units |
| Valuation | Mostly comparable sales | Comparable sales plus income approach |
| Maximum LTV | Up to 80% on purchase | Often lower; varies by program |
| Insurance | Landlord policy | Often a small commercial or package policy |
This example is illustrative and not a quote. An investor buys a six-unit brick building for $1,140,000. Each one-bedroom unit rents for about $1,425, for gross rent of $8,550 a month. Taxes are about $860 a month and the building insurance policy is about $520 a month. The tenants pay their own electricity.
At 75% LTV the loan is $855,000, estimated principal and interest is about $5,833, the total payment is about $7,213 and the DSCR is about 1.19x. At 70% LTV the loan is $798,000, the total payment is about $6,824 and the DSCR is about 1.25x.
If the program for this building caps leverage lower than 75%, the 70% scenario shows the ratio still clears 1.0x with room to spare.
Older brick apartment buildings can carry deferred maintenance that a quick tour misses: original plumbing stacks, aging boilers, flat or low-slope roofs, and brick mortar joints that need repair. Even though DSCR qualification focuses on the payment, the appraiser and your own budget should account for these.
Who pays utilities makes a large difference. Buildings with one water meter or a central boiler put more cost on the owner. Know what is separately metered before you set rents.
Parking is a practical issue in close-in Durham. Older buildings near Ninth Street and Trinity Park often have few or no off-street spaces, which tenants accept near campus but which can limit rents for buildings farther out.
Buildings near Duke often lease to graduate students and medical trainees on 12-month leases that turn over in summer. A rent roll full of August lease dates is normal here. What matters is that the leases are at market rent and that the building has a track record of filling.
If the building has vacancies at the time of purchase, a bridge loan can carry it through lease-up before a DSCR refinance.
Buildings that rent to undergraduates by the bedroom are a different story. Per-bedroom leasing with frequent turnover can make income harder to support, and some programs treat it cautiously. A building leased by the unit on standard 12-month leases is the easiest to underwrite.
Five or more units often moves the insurance onto a small commercial or package policy, which can cost more than a landlord policy on a fourplex. Get the quote early. North Carolina's state preemption of rent control applies to these buildings too, and landlords follow the state Residential Rental Agreements Act.
Exterior changes in a local historic district, including windows and masonry, may need a Certificate of Appropriateness. Interior unit renovations generally just need permits.
Some Durham investors create 5-8 unit properties instead of buying them, either by converting a large old house into apartments or by building a new small building on an infill lot. Conversions need permits and must meet building and fire code for the new unit count, including separation between units and exits. Unpermitted conversions are a common problem in older Durham buildings, and they can reduce the number of units an appraiser will count.
For a new building, a construction loan sized on loan-to-cost can fund the project, followed by a DSCR refinance once the units are leased. Planning that sequence from the start keeps the rent roll and the long-term loan aligned.
Send the address, price, rent roll, leases, and the last year of operating expenses if you have them. The more complete the operating history, the faster we can size the loan. Use the form below or call (877) 298-1001. Our investor loans are business-purpose loans on non-owner-occupied property.
Buildings with 1 to 8 units qualify for our residential DSCR programs. Nine or more units is commercial lending.
It varies by program and is often lower than the 80% available on 1-4 units. Larger balances can also see lower maximum LTV.
We use the combined rent of all units from the rent roll and leases, supported by the appraisal.
Some programs consider it. Experience can affect leverage and reserves, but it is not always required.
Vacancies lower the rent we can count. A bridge loan through lease-up, followed by a DSCR refinance, is a common path.
No. North Carolina law prohibits local rent control.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
Yes. Rate-and-term and cash-out refinances are available on 5-8 unit buildings, qualified on the combined rent, with leverage that varies by program.
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