Five- to eight-unit buildings in Northwest Arkansas come in two flavors: older walk-ups and converted houses near the University of Arkansas, and newer small buildings and cottage courts going up as the region adds housing. Both can be financed as residential property on a DSCR loan.
In short: LendingStreet finances 5-8 unit residential buildings across Fayetteville, Springdale, Rogers, Bentonville and the rest of Northwest Arkansas with DSCR loans that qualify on the building's combined rent, with no tax returns or W-2s. Loans start at $150,000 with no stated maximum, with a 1.0x standard minimum DSCR and a 620 minimum credit score. Maximum LTV on 5-8 units can be lower than on 1-4 units and varies by program.
Near campus, Dickson Street and the Fayetteville Square, older two-story buildings with six or eight units house students and young professionals. Some are purpose-built apartments from the 1960s through the 1980s; others are large houses converted to several units.
Elsewhere, newer 5-8 unit buildings and cottage-style developments have appeared in Fayetteville, Rogers and Bentonville as cities allow more housing types. Springdale has older small buildings near its downtown that rent to working households.
These buildings rarely come to market the same way single-family homes do. Many trade between local investors or through commercial agents, and being ready with financing, or a quick bridge loan, can matter when one comes up.
| Area | Typical building | Tenant base |
|---|---|---|
| Near campus and Dickson Street | Older walk-ups, converted houses | Students, university staff |
| Central and south Fayetteville | Newer small buildings, cottage courts | Young professionals |
| Downtown Springdale | Older small buildings | Working households |
| Rogers, Bentonville | Newer 5-8 unit buildings | Corporate and vendor employees |
This example is illustrative and not a quote. An investor buys a six-unit building a few blocks from campus for $1,060,000. Each unit leases for $1,290, for $7,740 a month. Taxes are $700 a month and insurance $520.
At an illustrative 75% LTV the loan is $795,000, with estimated principal and interest of about $5,559, a total payment of about $6,779 and a DSCR of about 1.14x. If the program caps this building at 70%, the loan is $742,000 and the DSCR is about 1.21x. The investor brings about $53,000 more at the lower leverage.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Loan | $795,000 | $742,000 |
| Estimated principal and interest | $5,559 | $5,188 |
| Taxes and insurance | $1,220 | $1,220 |
| Total payment | $6,779 | $6,408 |
| Gross rent | $7,740 | $7,740 |
| DSCR | About 1.14x | About 1.21x |
Student buildings follow the academic calendar. Most leases start in August, and many tenants sign months in advance. A building bought in spring with next year's leases already signed is easier to finance than one bought in July with units open.
Turnover costs are higher than with long-term tenants: paint, cleaning, carpet and repairs each summer. Parking is a real constraint near campus, and buildings with off-street spaces lease faster. Check city rules on occupancy limits for unrelated tenants before you count on per-bedroom rent.
Some campus-area buildings are older houses divided into units. Confirm that the number of units is legal under current zoning and was permitted, since an unpermitted unit can create problems with insurance, appraisal and resale. Older buildings also need close inspection of electrical, plumbing, roofs and fire separation between units.
Ask the seller for permits and certificates for the conversion, and check whether the city has any rental inspection or registration requirements for the building.
Maximum LTV on 5-8 unit buildings is often lower than on 1-4 units and varies by program and loan size. Reserves can be higher. Plan your down payment around a range, and keep reserves for summer turnovers and hail-season roof repairs.
The worked example shows why that matters. Moving from 75% to 70% LTV on a building at this price changes the cash needed by more than $50,000 and lifts the ratio, so ask early what the limit is for the building you are considering.
Arkansas assesses real property at a 20% assessment ratio, and city, county and school millage all apply. If the building sold well above its assessed value, the county may reassess it upward at the next reappraisal. Budget on a realistic figure, and confirm with the Washington County or Benton County assessor.
Fayetteville city millage applies inside city limits, so a building just outside town in the county can carry a different bill at the same value.
Insurance on older multi-unit buildings depends on roof age, wiring, plumbing and fire separation between units. Northwest Arkansas hail and wind exposure also shows up in the deductible. Get a quote before you go under contract, and ask for the current policy and claims history.
Some older buildings have a single water meter, so the owner pays water and sewer for every unit. Owner-paid utilities are not part of the DSCR calculation, but they come out of your cash flow. Ask for 12 to 24 months of bills and look at summer and winter months.
If a building has vacancies or below-market leases, a bridge loan to buy and stabilize it, followed by a DSCR refinance on the improved rent roll, can be the better route. Near campus, that often means buying in early spring and refinancing after August leases start.
Send the rent roll, price and address with the form below or call (877) 298-1001. Our investor loans are business-purpose loans on non-owner-occupied property. See our Arkansas 5-8 unit page for other markets.
Buildings with nine or more units are commercial property. See our multifamily loan page for those.
If you are comparing an eight-unit building with a ten-unit one, the financing paths differ, so ask us about both early in your search.
Include the lease dates for each unit, since timing matters near campus.
For our programs, 1-8 units is residential and can use a DSCR loan. Nine or more units is commercial. The distinction changes the loan program, documents and underwriting.
It varies by program and is often lower than on 1-4 units. Ask us early for the limit on your building.
Yes. The rent used is what the leases support. Check city occupancy rules for unrelated tenants. Signed leases for the coming school year help.
Yes, if the units are legal under zoning and were permitted. Unpermitted units can cause problems with insurance, appraisal and resale.
No. The loan qualifies on the building's combined rent. LLC borrowers are standard and the minimum credit score is 620.
The standard minimum is 1.0x, with sub-1.0 programs available in some cases. Most small buildings here are underwritten at or above 1.0x.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
2-3 competing quotes from 30+ capital sources. No credit pull. No commitment.
By clicking, you provide express written consent to be contacted by LendingStreet (NMLS #1734316) via SMS, phone, or email, possibly using automated technology, regarding your loan inquiry. Reply STOP to opt out. Consent is not required to obtain services. See our Privacy Policy and Terms.