Michigan's small multifamily market includes brick buildings in Detroit, Grand Rapids and Lansing, and student buildings in Ann Arbor and Kalamazoo. The rule that catches investors is Proposal A: a building's taxable value resets when it sells.
In short: Yes. LendingStreet finances 5 to 8 unit rental buildings in Michigan 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 Michigan, the taxable value uncap on sale under Proposal A, the non-homestead school millage and state and county transfer taxes are the items that most often move the ratio.
Detroit has small brick apartment buildings in Midtown, Woodbridge, Corktown and the neighborhoods near Palmer Park. Grand Rapids has small buildings in Heritage Hill and Eastown, and Lansing and East Lansing near Michigan State have student buildings.
Ann Arbor near the University of Michigan has small buildings at high prices, Kalamazoo has buildings near Western Michigan, and Flint and Saginaw have older buildings at lower prices.
LendingStreet treats 1 to 8 units as residential, so a five-, six-, seven- or eight-unit building in Michigan 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. Grand Rapids and Ann Arbor have regular small multifamily sales; Detroit prices vary widely block by block.
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.
Under Proposal A, a property's taxable value can only rise by a capped amount each year while the same owner holds it, but it uncaps the year after a sale and resets toward half of market value. That means a building's tax bill can jump after you buy it, sometimes sharply. Rentals also pay the non-homestead school operating millage that owner-occupants do not.
Michigan charges a state transfer tax and a county transfer tax on deeds, usually paid by the seller. Buyers mainly pay recording, title and lender costs. Ask your title company for figures and estimate taxes at your purchase price.
Winter weather affects roofs, gutters and pipes, and carriers ask about heating systems, roof age and electrical service on older brick buildings. Some Detroit buildings need system upgrades before carriers will quote at a workable price.
Basement flooding after heavy rain has been a recurring issue in parts of metro Detroit, and some areas near lakes and rivers sit in flood zones. A whole-building quote is the number that goes into the DSCR payment.
This example is illustrative and not a quote. An investor buys a Grand Rapids eight-unit building for $1,050,000. Each of the 8 units rents for $1,250 a month, for $10,000 in total. Property taxes are budgeted at $21,000 a year and the whole-building insurance quote is $9,000 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 $2,500 for taxes and insurance brings the payment to about $8,006, so the DSCR is about 1.25x, above the 1.0x standard minimum. If taxes came in $4,000 a year higher after reassessment, the ratio would fall to about 1.20x.
| Item | Amount |
|---|---|
| Purchase price | $1,050,000 |
| Units and gross monthly rent | 8 units, $10,000 |
| Loan at 75% LTV | $787,500 |
| Principal and interest (30-year) | About $5,506 |
| Taxes and insurance per month | About $2,500 |
| Total monthly payment | About $8,006 |
| DSCR | About 1.25x |
Detroit requires rental registration, inspections and a certificate of compliance before a property can be legally rented, and the city has tied rent collection rights to compliance. Grand Rapids, Lansing and Ann Arbor have their own rental certification programs.
Michigan state law preempts local rent control. Ann Arbor and East Lansing student buildings often have leases signed far in advance, so keep lease dates organized for underwriting.
Having these together before you apply keeps the appraisal and underwriting on schedule.
These loans fit investors in Michigan 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 Michigan 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.
Under Proposal A, taxable value uncaps on sale. Budget taxes at the new value.
Yes. Detroit requires rental registration and a certificate of compliance.
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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