Madison's small apartment buildings are tucked into the isthmus and the blocks around campus: brick walk-ups in Tenney-Lapham and Mansion Hill, converted houses on Langdon Street, and 1960s buildings on the near west side. They fill the gap between a two-flat and a large complex.
In short: LendingStreet finances 5-8 unit residential buildings in Madison and across Dane County with DSCR loans that qualify on the combined rent of all units, with no W-2s or tax returns. Loans start at $150,000 with no stated maximum and the standard minimum DSCR is 1.0x; maximum LTV on 5-8 unit properties can be lower than on smaller rentals and varies by program. Buildings with 9 or more units are commercial and covered on our multifamily page.
On the isthmus, Tenney-Lapham, Mansion Hill, James Madison Park and the Marquette neighborhood have brick and frame buildings from the early 1900s through the 1960s, many with five to eight apartments. Near campus, the Langdon Street area, Mifflin and Bassett streets and the blocks south of Regent Street mix converted houses with small purpose-built apartment buildings.
Away from the center, you will find 1960s and 1970s six- and eight-unit buildings on the near west side, the Northside and in older parts of Monona and Middleton, usually leased to workforce tenants.
Our programs treat 1-8 units as residential, so a six-unit building qualifies on its rent the same way a two-flat does. You do not need commercial underwriting or personal income documents.
The differences are leverage, reserves and appraisal method. Maximum LTV can be lower than on 1-4 units, reserves can be higher, and the appraiser relies heavily on the income approach because few buildings exactly like yours sell in any given year.
This example is illustrative and not a quote. An investor buys a six-unit brick building in Tenney-Lapham for $1,150,000. Each apartment rents for $1,500, so gross rent is $9,000 a month. Taxes are $1,850 and insurance is $410 a month.
At 75% LTV the loan is $862,500, the payment is about $8,291 and DSCR is about 1.09x. At 70% LTV the loan is $805,000 and DSCR is about 1.14x; at 65% it is about 1.20x. On top of the loan payment, the owner pays shared heat, water and other building costs of about $1,260 a month.
| Item | 75% LTV | 70% LTV | 65% LTV |
|---|---|---|---|
| Loan amount | $862,500 | $805,000 | $747,500 |
| Estimated principal and interest | $6,031 | $5,629 | $5,227 |
| Taxes and insurance | $2,260 | $2,260 | $2,260 |
| Total monthly payment | $8,291 | $7,889 | $7,487 |
| DSCR at $9,000 rent | About 1.09x | About 1.14x | About 1.20x |
Many older Madison buildings have a single boiler and one water meter, so the owner pays heat and water. In a Wisconsin winter, heat is a real expense. Snow removal, common-area electricity and turnover costs each August add to it. These costs are not part of the DSCR payment on most programs, but they come out of your cash flow every month.
In Wisconsin, buildings with three or more units generally fall under the state's commercial building code rather than the one- and two-family dwelling code. That affects renovations and alterations: fire separations, exits, alarms and accessibility can all come into play when you change a layout or add a unit.
Before you buy, ask for any recent inspection reports and permits, and talk with the city's building inspection staff if you plan significant work.
Buildings near campus usually turn over on or around August 15, with leases for the next year signed months ahead. Rents can be strong and demand steady, but wear is heavy and the turnover window is short. Lenders and appraisers look at signed leases and a rent roll, and many programs use the lower of actual rent and market rent.
Workforce buildings away from campus turn over less predictably but more evenly through the year, with less wear per turnover. Their rents per unit are often lower than campus rents, but vacancies around August are less concentrated, which some owners prefer.
Whichever type you buy, check the city's occupancy rules for each unit. Zoning limits how many unrelated adults may share an apartment in many districts, and a rent roll built on more tenants than the rules allow overstates the income.
A six-unit building in Madison carries a large tax bill, and the city updates assessments frequently. A purchase well above the current assessment can lead to a higher bill. Use your purchase price to estimate taxes, and confirm with the City Assessor's office. The lottery and gaming credit does not apply to investment property.
If the building has nine or more apartments, or ground-floor commercial space, it falls outside our residential programs. Our multifamily loans page covers those properties. For a group of smaller buildings, a blanket portfolio loan can combine five or more rentals, each 1-8 units, under one loan.
Send LendingStreet the address, price, rent roll, two years of operating statements and utility bills. We will run the ratio at the leverage your building is likely to get and show you the options. For statewide context, see our Wisconsin 5-8 unit page and our general 5-8 unit DSCR guide. Include any recent inspection reports, since older isthmus buildings often have a history worth reviewing.
Yes. We treat 1-8 units as residential, so a six-unit building qualifies on combined rent without tax returns or W-2s.
It can be. Maximum LTV on 5-8 unit buildings is often lower than on 1-4 units and varies by program and loan size. Reserve requirements can be higher as well.
On most programs the ratio uses principal, interest, taxes, insurance and any HOA. Owner-paid utilities still reduce your cash flow, so budget for them.
Generally the state's commercial building code, which applies to buildings with three or more units. It matters most when you renovate or change the layout.
Yes, if it is 5-8 units and its occupancy complies with city rules. Signed leases for the coming year and a rent roll help support the rent, and the appraiser will compare it with nearby campus buildings.
Nine or more units is commercial and falls outside our residential programs. See our multifamily loans page.
They may. Madison updates assessments frequently, so a purchase above the current assessment can raise the bill. Budget on your purchase price.
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