Chicago is one of the great small multifamily cities. Two-flats, three-flats and classic brick six-flats line the streets of Logan Square, Albany Park, Rogers Park and Pilsen. Cook County property taxes and Chicago's transfer taxes are what make Illinois 5-8 unit underwriting different.
In short: Yes. LendingStreet finances 5 to 8 unit rental buildings in Illinois with DSCR loans that qualify on the building's rent, starting at $150,000 with no stated maximum and LLC borrowers standard. Purchases can go up to 80% LTV and cash-out up to 75%, though maximum leverage on 5-8 units varies by program. In Illinois, Cook County property taxes and reassessments, Chicago's high transfer tax and the city's landlord ordinance are the items that most often shape a 5-8 unit deal.
Chicago's six-flats are typically three-story brick buildings with two units per floor, common in Logan Square, Humboldt Park, Albany Park, Rogers Park, Uptown and the Southwest Side. Courtyard buildings are often larger than eight units, but many 5-8 unit properties are on corner lots or narrow city lots.
Outside Chicago, Peoria, Rockford, Champaign-Urbana near the University of Illinois and Springfield have older small buildings at lower prices. Suburban Cook and DuPage counties have small buildings mixed into older downtowns.
LendingStreet treats 1 to 8 units as residential, so a five-, six-, seven- or eight-unit building in Illinois is underwritten as a rental property rather than a commercial loan. The loan qualifies on the building's rent: total monthly rent divided by the full monthly payment, including principal, interest, taxes, insurance and any association dues.
Standard programs look for 1.0x or better, and sub-1.0 programs exist for buildings that come up a little short. Maximum leverage on 5-8 unit properties is often lower than on a single-family rental and varies by program and loan size.
A 5 to 8 unit building is usually appraised with more weight on the income approach than a house would be. The appraiser compares its rents with similar small buildings nearby and reconciles that with sales comparables. Chicago's small multifamily sales are frequent, so six-flats usually have close comparables; downstate markets may require broader searches.
Underwriting works from the rent roll and the leases. Expect to provide a current rent roll showing each unit, its rent and lease dates, plus copies of the leases. Vacant units are usually counted at the appraiser's market rent, and some programs use the lower of actual and market rent.
Cook County property taxes are high, and the county reassesses on a three-year cycle by area, so a building's bill can rise sharply after reassessment. Use the latest assessment and check when your township is next.
Illinois charges a state transfer tax, Cook County adds its own, and Chicago adds a city transfer tax that is higher than most, much of it paid by the buyer. Ask your attorney for the exact figures.
Chicago buildings often have older boilers, rear wooden porches and older electrical service. Carriers ask about these, and Chicago requires porch safety. Older systems can raise premiums or narrow options.
Severe weather, hail and basement flooding are concerns across Illinois. A whole-building quote is the number to use.
This example is illustrative and not a quote. An investor buys a Chicago six-flat for $1,050,000. Each of the 6 units rents for $1,600 a month, for $9,600 in total. Property taxes are budgeted at $19,000 a year and the whole-building insurance quote is $9,500 a year.
At 75% LTV the loan is $787,500, leaving $262,500 down before closing costs. On 30-year amortization, principal and interest is about $5,506 a month. Adding $2,375 for taxes and insurance brings the payment to about $7,881, so the DSCR is about 1.22x, above the 1.0x standard minimum. If taxes came in $4,000 a year higher after reassessment, the ratio would fall to about 1.17x.
| Item | Amount |
|---|---|
| Purchase price | $1,050,000 |
| Units and gross monthly rent | 6 units, $9,600 |
| Loan at 75% LTV | $787,500 |
| Principal and interest (30-year) | About $5,506 |
| Taxes and insurance per month | About $2,375 |
| Total monthly payment | About $7,881 |
| DSCR | About 1.22x |
Chicago's Residential Landlord and Tenant Ordinance applies to most rental buildings, with exemptions mainly for small owner-occupied buildings, so an investor's 5-8 unit building is generally covered. It sets strict rules on security deposits and interest, so keep records.
Illinois law preempts local rent control. Downstate cities may have rental registration or inspection programs.
Having these together before you apply keeps the appraisal and underwriting on schedule.
These loans fit investors in Illinois who want to qualify on the building's income instead of personal tax returns, hold title in an LLC and finance on a 30-year term. Our investor loans are business-purpose loans on non-owner-occupied property, so a building where you plan to live in one of the units is not eligible.
If the building needs heavy renovation or has several vacant units, a short-term bridge loan and a later refinance into a DSCR loan can be the better path. Buildings with nine or more units are commercial; see our multifamily loans page for those. Call (877) 298-1001 or use the form below to get a quote.
Yes. LendingStreet finances 5 to 8 unit investment buildings in Illinois with DSCR loans from $150,000, qualified on the building's rent with LLC borrowers standard.
LendingStreet treats 1 to 8 units as residential, so a 5 to 8 unit building is underwritten as a rental property on its rent. Nine or more units is commercial lending.
Cook County property taxes are high, and reassessment every three years can raise them. On a six-flat, taxes are often the largest line after principal and interest.
Generally yes. The ordinance covers most rental buildings, with exemptions mainly for small owner-occupied buildings. It has strict security deposit rules.
No. Our investor loans are business-purpose loans on non-owner-occupied property, so the building has to be fully used as a rental.
Vacant units are usually counted at the appraiser's market rent, and some programs use the lower of actual and market rent. Several vacancies can reduce the loan amount, and a bridge loan may be the better first step.
Yes, up to 75% LTV on standard programs, often lower on 5-8 units. The rent still has to cover the new payment, and seasoning rules vary by program.
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