Huntsville's rental demand runs on engineers, contractors and federal workers tied to Redstone Arsenal and Cummings Research Park. Small apartment buildings here benefit from low property taxes, but the supply is thin.
In short: LendingStreet finances 5 to 8 unit rental buildings in Huntsville, Madison and the rest of Madison and Limestone counties with DSCR loans based on rent, not income. Loans start at $150,000, the standard minimum DSCR is 1.0x and LLC borrowers are standard. Alabama assesses rentals at a 20% assessment ratio rather than the 10% for an owner's home, but overall tax bills are still low, so insurance and rent level usually decide the ratio.
Older small apartment buildings cluster near downtown, the Medical District around Huntsville Hospital, Blossomwood and the blocks around Lowe Mill, plus pockets near Alabama A&M and UAH. South Huntsville along Memorial Parkway has 1970s brick buildings that lease to working tenants.
Madison and Harvest are dominated by newer single-family subdivisions, so 5-8 unit buildings there are rare. Athens and Decatur offer lower prices and occasional small buildings within commuting distance of the Arsenal.
| Area | Typical stock | Tenant base |
|---|---|---|
| Medical District and downtown | Older small buildings, some renovated | Hospital staff, young professionals |
| Near UAH and Research Park | Garden buildings | Students, engineers, contractors |
| South Huntsville | 1970s brick buildings | Workforce tenants |
| Athens and Decatur | Mixed older stock | Commuters, lower rents |
Redstone Arsenal hosts Army commands, NASA's Marshall Space Flight Center and a large and growing federal and contractor workforce. Cummings Research Park is one of the largest research parks in the country. That employment base supports steady rental demand, though new apartment construction has also been heavy.
Buildings that are close to Arsenal gates and Research Park, or along I-565, tend to lease fastest. Contractors on fixed-term assignments sometimes prefer furnished units or shorter leases, which can affect turnover.
This example is illustrative and not a quote. An investor buys a six-unit 1970s brick building off Memorial Parkway in South Huntsville for $840,000. Rents average $1,150 per unit across all 6 units, for $6,900 of gross monthly rent. The budget carries $420 a month for taxes and $380 for insurance.
With a 75% LTV loan of $630,000, estimated principal and interest runs about $4,405 and the total payment about $5,205, which puts DSCR near 1.33x. Cutting leverage to 70% LTV, a $588,000 loan, lowers the payment to about $4,911 and lifts DSCR to about 1.40x, at the cost of $42,000 more down.
Low Alabama property taxes give this building room even at 75% LTV. Insurance is the line to watch, especially on an older roof.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Purchase price | $840,000 | $840,000 |
| Loan amount | $630,000 | $588,000 |
| Down payment | $210,000 | $252,000 |
| Estimated principal and interest | $4,405 | $4,111 |
| Property taxes (monthly) | $420 | $420 |
| Insurance (monthly) | $380 | $380 |
| Total monthly payment | $5,205 | $4,911 |
| Gross monthly rent | $6,900 | $6,900 |
| DSCR | About 1.33x | About 1.40x |
Alabama assesses an owner-occupied home at a 10% assessment ratio and other residential property, including rentals, at a 20% assessment ratio. Millage rates are low by national standards, so even at the higher ratio a Huntsville rental often has a smaller tax bill than a comparable building in Tennessee or Georgia. Use the Madison County revenue commissioner's records and budget at the rental class.
At closing, Alabama charges a deed tax on the transfer and a mortgage recording tax on the loan amount. Ask your closing attorney or title company for exact figures.
North Alabama sees frequent tornado warnings, especially in spring, and hail is common. Carriers have raised premiums and wind and hail deductibles across the region. Alabama law requires insurers to offer discounts for roofs built to the IBHS FORTIFIED standard, which can help on a building with a newer roof.
Ask for the roof age, any FORTIFIED certificate and the wind deductible when you price insurance.
The City of Huntsville and Madison County have their own permitting offices, and zoning outside the city can differ. Confirm the building's zoning allows its current unit count and that conversions were permitted. Annexed areas may have changed jurisdiction over time, which affects which tax and code rules apply.
Alabama landlord-tenant law follows a version of the uniform residential act, with set notice periods for nonpayment. Out-of-state owners usually hire a local manager who knows the Madison County district court process and local contractors.
Our DSCR loans treat a Alabama building of five to eight units as residential, 1 to 8 units, rather than commercial. That means qualification on the property's rent instead of your personal income, with no tax returns or W-2s, and title held in an LLC as a matter of course.
Minimum loan size is $150,000 and there is no stated cap. Program maximums are 80% LTV on a purchase and 75% LTV on a cash-out, with rate-and-term up to 80% on some programs; expect less on many 5-8 unit files, since leverage varies by program and balance. The usual floor is a 1.0x ratio and a 620 score, with sub-1.0 options for thin-margin buildings. Cash-out seasoning also varies by program.
Our investor loans are business-purpose loans on non-owner-occupied property. A complete package gets a faster answer, so gather the items below and send them through the form below, or call (877) 298-1001. The Alabama 5-8 unit DSCR page covers statewide issues; buildings of nine or more units belong on our commercial and multifamily pages.
Yes. Rentals are assessed at a 20% assessment ratio versus 10% for an owner's home. Millage is low, so bills are still modest compared with many states.
Largely. Redstone Arsenal, NASA Marshall and Cummings Research Park drive much of the area's job growth and rental demand.
Not very. Madison is mostly newer single-family homes. Most small apartment buildings are in Huntsville proper, Athens and Decatur.
Alabama requires insurers to offer discounts for FORTIFIED roofs. Ask your agent how much it would save on your building.
Yes. The DSCR program works the same way across Madison, Limestone and Morgan counties. Rents are usually lower outside Huntsville, but so are prices, so the ratio can still work.
Loans start at $150,000 with no stated maximum. Purchase leverage goes up to 80% LTV and cash-out up to 75%, but maximum LTV on 5-8 units is often lower and varies by program.
The appraiser's market rent can support vacant units on some programs, but a building with weak occupancy usually gets more scrutiny. A bridge loan can carry a lease-up before a DSCR refinance.
No. The loan qualifies on the building's rent, not your personal income, so W-2s and tax returns are not required. A 620 minimum credit score applies.
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