In Lancaster, a five- to eight-unit building is usually a big 19th century house that was divided into apartments decades ago, or a small brick walk-up on a corner lot. These buildings can cash flow well, but each one has its own history of conversions, permits and repairs.
In short: LendingStreet finances 5 to 8 unit residential buildings in Lancaster and across Lancaster County with DSCR loans that qualify on the combined rent of all units rather than personal income. 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 is often lower than on 1-4 units and varies by program.
Most buildings in this size range are in the city: large Victorians and Second Empire homes along and near East Orange, East Chestnut, North Duke and the streets around Musser Park and Franklin and Marshall, plus corner buildings with apartments in the West End and Southeast. Some boroughs, including Columbia, Ephrata, Lititz and Elizabethtown, have similar conversions downtown.
There are also some garden-style buildings from the 1960s and 1970s in the townships, though most garden complexes in the county are larger than eight units and fall into commercial financing.
Tenants for these buildings include hospital and college staff, young professionals working downtown and in the county's manufacturing and logistics employers, and graduate students. Units with off-street parking, updated kitchens and in-unit laundry lease fastest, and buildings close to Penn Square, the Central Market and the train station tend to hold occupancy well.
We total the rent from every unit and compare it with the building's full payment: principal and interest, county, municipal and school taxes, insurance and any association dues. The appraiser provides a rent schedule, and we review the rent roll and leases. Vacant units are generally counted at supportable market rent, though some programs limit vacancy.
Because these buildings are still residential for financing, you avoid a full commercial underwriting, but expect a closer look than a single rowhome: a more detailed appraisal, the rent roll and reserves that can be higher.
This example is illustrative and not a quote. An investor buys a five-unit converted house in the city for $720,000. Units rent for about $1,250 each, for combined rent of $6,250 a month. Taxes are budgeted at $800 a month and insurance at $310.
At 75% LTV the loan is $540,000, estimated principal and interest is about $3,730, the total payment about $4,840 and the DSCR about 1.29x. At 70% LTV the loan is $504,000, the payment about $4,591 and the DSCR about 1.36x.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Loan amount | $540,000 | $504,000 |
| Estimated principal and interest | $3,730 | $3,481 |
| Taxes | $800 | $800 |
| Insurance | $310 | $310 |
| Total monthly payment | $4,840 | $4,591 |
| DSCR at $6,250 combined rent | About 1.29x | About 1.36x |
The most important question on an older Lancaster conversion is whether every unit is legal. Ask for the city rental permits for each unit, the last inspection reports and any zoning or occupancy records. A unit that was added without approval may not be counted by the appraiser and could have to be removed.
Multi-unit buildings also face fire and life safety requirements that single-family rentals do not, such as separation between units, interconnected smoke alarms, protected exits and, on upper floors, a second means of egress. Upgrades can be expensive in an old building, so get them priced before closing.
If the building is in a historic district, exterior work such as fire escapes, windows and porches may also need review, which affects both cost and schedule.
Many converted buildings were never fully separated. A single water and sewer account, a shared boiler or a house electric meter means the owner pays those bills. They are not part of the DSCR payment, but they come out of your cash flow every month. Separating meters can be worthwhile but is often costly in an old structure.
Pennsylvania real estate taxes are based on the county assessment, and Lancaster County's assessments are not updated every year, so a building's assessment can lag well behind its sale price. A school district may appeal after a sale, which would raise the bill. Get the actual bills from the county, the city or municipality and the school district, and ask about the district's appeal practice.
City buildings also pay the City of Lancaster's municipal tax on top of county and school taxes, so a building inside the city and a similar one in a neighboring township can carry noticeably different bills.
Insurers price older multi-unit buildings on age, construction, roof, wiring, heating and claims history. Slate and flat roofs, older electrical panels and oil heat can affect pricing or eligibility. Get a full quote, including liability and loss of rents coverage, early in your due diligence. Properties near the Conestoga River should be checked against flood maps.
Ask the seller for the roof age, the last electrical and heating service records and any open insurance claims. These details shape both the premium and the repairs you should reserve for in your first year.
Nine or more units is commercial financing; see our multifamily loans page. If you own several smaller Lancaster buildings, a blanket portfolio loan can combine five or more properties under one loan.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the address, price, rent roll, leases, rental permits, tax bills and an insurance quote through the form below, or call (877) 298-1001. For statewide context, see our Pennsylvania 5-8 unit DSCR page.
Residential. We finance 5 to 8 unit buildings with DSCR loans; nine or more units is commercial.
It varies by program and is typically lower than on 1-4 units. Purchases go up to 80% LTV on standard DSCR programs, with 5-8 unit limits often below that.
The appraiser may not count its rent, and it could affect value and eligibility. Confirm permits for every unit before you buy.
No. The DSCR payment covers principal, interest, taxes, insurance and association dues. Utilities still affect your actual cash flow.
No. The loan qualifies on the building's rent, with a 620 minimum credit score.
Yes. Rate-and-term and cash-out refinances are available, with leverage that varies by program.
Yes. We lend across Lancaster County, including boroughs with older downtown conversions, on 5-8 unit residential buildings.
They affect your budget and the building's legal use. Required upgrades should be done or budgeted before closing.
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