Few metros have as many small apartment buildings per capita as Fargo. Two-story walk-up six-plexes and eight-plexes line streets across north and central Fargo, and many trade between local owners every year.
In short: LendingStreet finances 5 to 8 unit residential buildings in Fargo and West Fargo with DSCR loans that qualify on the combined rent of all units. 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.
Much of Fargo's small apartment stock was built in the 1960s through the 1980s: rectangular two-story buildings with a center stairwell, four units per floor, a shared laundry room and off-street parking, often with detached garages or plug-in stalls. They lease to students, healthcare and service workers and young professionals.
Newer five- to eight-unit buildings, often townhome-style with attached garages, are common in south Fargo and West Fargo. They rent for more per unit and have lower maintenance costs, but they usually carry larger special assessments.
These buildings were built to similar plans for years, so their strengths and weaknesses are well known: durable construction, simple layouts and good parking, but aging boilers, original windows and parking lots that need resurfacing. Local property managers know them well, and their input is worth getting before you buy.
Five to eight units still count as residential. The loan qualifies on combined rent, with no tax returns, and can have a 30-year term. Buildings with nine or more units are commercial loans; Fargo has plenty of 12-plexes, and those need a different program.
For many Fargo investors, an eight-plex is the logical next step after a few duplexes and fourplexes. It brings more rent per closing and more efficient management, without the commercial loan process that comes with larger buildings.
This example is illustrative and not a quote. An investor buys a 1970s eight-plex in north Fargo for $880,000. Units lease for an average of $925, or $7,400 a month. Taxes and specials are budgeted at $1,100 a month and insurance at $450.
At 70% LTV the loan is $616,000. Estimated principal and interest on a 30-year term is about $4,307, the full payment is about $5,857 and DSCR is about 1.26x. The cushion above 1.0x matters, because the owner also pays heat, water and common-area electric in many buildings like this.
If the building also has detached garages that rent separately, that income may help on some programs if it is documented. Keep separate garage leases and a payment history.
| Item | Amount |
|---|---|
| Purchase price | $880,000 |
| Loan at 70% LTV | $616,000 |
| Estimated principal and interest | $4,307 |
| Taxes and specials | $1,100 |
| Insurance | $450 |
| Total payment | $5,857 |
| Rent, eight units | $7,400 |
| DSCR | 1.26x |
Max LTV on 5-8 unit buildings can be lower than on one- to four-unit properties and varies by program. Expect higher reserve requirements. If one or two units are vacant at purchase, some programs can count market rent, but appraisers will look at the full rent roll and local vacancy.
Appraisers often use both sales of similar buildings and an income approach for five- to eight-unit properties. Share a rent roll and operating history, because those numbers support both the value and the ratio.
Lenders also look at your experience managing rentals. Owners who already run several units, or who hire a professional property manager, tend to get the smoothest approvals on five- to eight-unit buildings.
DSCR uses the loan payment, taxes, insurance and dues. It does not include utilities, snow removal, lawn care, laundry upkeep or management. In older Fargo eight-plexes the owner often pays for a central boiler and water. Get two years of operating statements before you buy.
Many Fargo buyers plan to add separate meters or move utility costs to tenants over time. That can improve cash flow, but it is a capital project with its own budget. Do not count the savings until the work is done.
A professional manager's opinion of the building's real operating costs is often worth more than the seller's summary, especially on buildings that have been self-managed for years.
Street reconstruction and utility projects in older neighborhoods can bring new special assessments. Check for pending projects on the block. Pull the flood zone and get an insurance quote that includes hail and wind deductibles, since a large flat or low-slope roof can be expensive to replace.
Parking lots and driveways in older buildings are a common hidden cost. Freeze-thaw cycles break down asphalt, and resurfacing a lot for eight units can cost far more than a homeowner would expect. Ask about the lot's age and condition.
Many Fargo eight-plexes are owned by local investors who have held them for decades. Rents may be below market and leases may be informal. Ask for a written rent roll, signed leases and deposit records. A building with below-market rents can be a good buy, but the DSCR is based on the rent it produces or supports today.
Below-market rents also create an opportunity. Some buyers start with a bridge loan, raise rents at turnover and refinance into a DSCR loan once the building produces its full income. That path works best when the building needs only modest work.
Once you own several small buildings, a blanket portfolio loan can combine them with your other rentals under one loan. If you plan to buy a 12-plex later, see our multifamily loans page for 9+ unit financing.
Some owners also refinance a group of eight-plexes together when they come up for renewal with a local bank. Combining loans can simplify payments and reduce the number of maturity dates you track.
Send the rent roll, operating statements, price and address. Our investor loans are business-purpose loans on non-owner-occupied property. Call (877) 298-1001 or use the form below.
Yes. Properties with 1-8 units qualify for residential DSCR loans.
Nine or more units is commercial. See our multifamily loans page.
Max LTV can be lower than on 1-4 units and varies by program, so plan a larger down payment.
Some programs use market rent for vacant units. Signed leases carry the most weight.
Not directly. It affects your cash flow, so budget for it.
No. The loan qualifies on combined rent, credit and reserves.
It may, if it is documented and typical for the market. Ask about your program.
Yes. LLC borrowers are standard.
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