Many of Knoxville's small apartment buildings started life as large Victorian or Craftsman houses that were split into units decades ago, especially in Fort Sanders next to the University of Tennessee. Others are 1960s and 1970s brick buildings in North Knoxville and along older corridors. All of them fit our residential DSCR program.
In short: LendingStreet finances 5 to 8 unit residential buildings in Knoxville with DSCR loans qualified on the combined rent of all units, with no tax returns. Loans start at $150,000 with no stated maximum, the standard minimum DSCR is 1.0x, the minimum credit score is 620 and LLC borrowers are standard. Max LTV on 5-8 unit properties varies by program and is often lower than on 1-4 units.
Fort Sanders, between UT's campus and the hospitals, has the highest concentration of converted houses and small apartment buildings. Tenants are mostly students, with some medical staff.
North Knoxville, Fourth and Gill, Old North and Fountain City have small brick buildings and converted homes that rent to professionals. Older corridors in East and West Knoxville have garden-style buildings with long-term working tenants.
Buildings in Fort Sanders can command strong rents because of their location, but they also face parking limits, tight lots and older construction. Buildings elsewhere often rent for less but turn over less often.
| Area | Typical building | Leasing pattern |
|---|---|---|
| Fort Sanders | Converted houses, small brick buildings | Annual leases timed to the academic year |
| North Knoxville, Fourth and Gill | Converted Victorians, small brick buildings | Year-round, professionals |
| East and West Knoxville corridors | Garden-style 1960s to 1980s buildings | Year-round, working households |
This example is illustrative and not a quote. An investor buys a six-unit converted house near campus for $960,000. Each unit rents for $1,325, or $7,950 a month. City and county taxes are budgeted at about $750 a month and insurance at $620.
At 70% LTV the loan is $672,000. Estimated principal and interest is about $4,694, and the total payment is about $6,064, a DSCR of about 1.31x. If one unit sat empty for the year, rent would drop to about $6,625 and DSCR to about 1.09x, still above 1.0x.
The vacancy column is a simple stress test. On small buildings, one empty unit is a large share of income, so a building that only works when every unit is full leaves little margin for error.
| Item | Fully leased | One unit vacant |
|---|---|---|
| Monthly rent | $7,950 | $6,625 |
| Loan amount at 70% LTV | $672,000 | $672,000 |
| Estimated principal and interest | $4,694 | $4,694 |
| Taxes and insurance | $1,370 | $1,370 |
| Total monthly payment | $6,064 | $6,064 |
| DSCR | 1.31x | 1.09x |
Fort Sanders units usually lease for the academic year, often signed months in advance. If you buy in summer, make sure units are leased for fall, because a vacant student unit in September may stay empty until the next cycle.
Parents often sign for student tenants, and turnover each summer means regular repainting and repairs. Budget for both.
Student buildings also tend to see more wear between leases. Plan a turnover budget each summer for paint, flooring repairs and cleaning, and schedule it in the short window between move-out and move-in.
Older conversions may not meet current code for fire separation, exits or electrical service. Confirm the legal unit count with the city, and look at the permit history for each unit.
Ask the seller for recent inspection reports, repair invoices and any code enforcement history. Those records tell you more about how the building was run than the listing does.
Tennessee assesses residential property at a 25% assessment ratio, and city properties pay both city and county rates. Knox County reappraises periodically, so use the most recent assessment.
Insurance on an older wood-frame building with several units costs more than on a single-family home. Owners often pay water and common-area electric, which belong in your budget even if they are not in the DSCR payment.
Professional management is common on small buildings, especially student housing. A fee does not usually count in the DSCR payment but belongs in your own budget, along with vacancy and repairs.
The DSCR math is the same: combined rent divided by the full payment. Leverage is often lower than on 1-4 units, appraisals can take longer, and reserves can be higher.
Nine or more units is a commercial loan; see our multifamily page.
Appraisers often use both sales comparables and an income approach on 5-8 unit buildings. Give them the rent roll and operating history early.
Owners with balloon or adjustable loans on small buildings can refinance into a 30-year DSCR loan. If units are vacant or need work, a bridge loan can carry the building first.
See our national 5-8 unit guide and Tennessee 5-8 unit page for more.
If you are buying from a long-time owner, ask whether the building has an older loan that must be paid off at a set date. Coordinating payoff and closing dates avoids last-minute surprises for both sides.
Updating units as tenants leave is the usual approach. New kitchens, in-unit laundry where possible and central air can bring units up to market rent.
Fund value-add work from reserves or plan a later refinance once more units reach market rent. Do not size the purchase loan on rents you hope to reach.
Send the rent roll, operating history, photos and contract. Call (877) 298-1001 or use the form below.
Include the lease end dates for each unit.
Yes. Our DSCR program covers 1-8 unit residential properties, so 5-8 unit buildings qualify on combined rent.
It varies by program and is often lower than on 1-4 unit properties. The building's condition, rent roll and your experience all affect where your file lands.
Yes, if the units are legally permitted and leased. Annual leases tied to the academic year are common. Make sure fall leases are signed before you close, since an empty student unit can stay vacant until the next school year.
A rent roll and operating history help. We do not need your personal tax returns. Your credit, with a 620 minimum, and reserves are also reviewed.
They qualify if the units are legal. Confirm the unit count and permits with the city. Unpermitted units may not count in the appraisal or the rent used to qualify.
That is a commercial loan. See our multifamily page.
Yes. LLC borrowers are standard. The members usually sign for the loan personally, and we review the LLC documents at closing.
A bridge loan may fit first, followed by a DSCR refinance once units are leased. Lease up the building, then refinance into a 30-year loan sized on the full rent roll.
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.