Most Philadelphia five to eight unit buildings started life as something else: a large twin in West Philadelphia, a corner store with apartments above, or a grand rowhouse on a Center City side street. They rent well, but the city's transfer tax and licensing rules come first.
In short: LendingStreet finances 5 to 8 unit rental buildings in Philadelphia with DSCR loans that qualify on the building's rent, with no W-2s or tax returns needed and LLC borrowers standard. Loans start at $150,000 with no stated maximum and the standard minimum DSCR is 1.0x. In Philadelphia, plan for the combined realty transfer tax at closing, a rental license and lead-safe certification for older units.
In University City and Spruce Hill, large Victorian twins were divided into five, six or more apartments decades ago and rent to students and staff at Penn, Drexel and the hospitals. Fairmount, Graduate Hospital and Rittenhouse side streets have big rowhouses converted into apartments. Fishtown, Northern Liberties and parts of South Philadelphia have newer buildings, including small new construction apartment buildings.
In Germantown, Mt. Airy and parts of North Philadelphia, stone and brick twins and mansions offer more units for the money but often need more work.
Corner mixed-use buildings with a storefront and apartments above are common across the city. Whether they fit a residential DSCR loan depends on the commercial share.
| Area | Typical 5-8 unit stock | What to check |
|---|---|---|
| University City, Spruce Hill | Divided Victorian twins | Student leases, fire code |
| Fairmount, Graduate Hospital | Large rowhouse conversions | Legal unit count, zoning |
| Fishtown, South Philadelphia | Newer small apartment buildings | Tax abatement expiration |
| Germantown, Mt. Airy | Stone and brick twins and mansions | Condition, heating systems |
Every unit's rent goes into one number, and that number is compared with the full payment, including taxes and insurance. If the rent covers the payment at 1.0x or better, the building clears the standard minimum. If it does not, a lower loan amount, a sub-1.0 program or a rent increase at turnover can close the gap.
Our programs treat buildings of 1 to 8 units as residential, so a five, six, seven or eight unit building qualifies the same way a single-family rental does: on rent, with no personal income documents. Maximum leverage is where 5-8 units differ. Purchase LTV can reach 80% on some programs but is often lower here and varies by program; cash-out goes up to 75%. Loans start at $150,000 with no stated maximum, terms run up to 30 years and the minimum score is 620. At nine units, the deal moves to commercial financing.
Newer Philadelphia buildings may carry a 10-year property tax abatement. When the abatement is close to ending, we budget the full tax bill, because that is what the loan will carry for most of its term.
Philadelphia adds a city realty transfer tax on top of the state 1%, and the combined rate is over 4%, one of the highest in the country. Pennsylvania charges a 1% state realty transfer tax, and most municipalities and school districts add their own. In Pennsylvania the total is customarily split between buyer and seller, though the contract can say otherwise, so your share is a real closing cost. On a $1M building, your half alone can run more than $20,000.
Philadelphia property taxes are based on the city's assessed market value. The Homestead Exemption only applies to owner-occupants, so check whether the seller had it. If a building has an abatement, look up when it expires.
Philadelphia requires a rental license for every rental unit, and landlords need the license to collect rent and to file for eviction. The city also requires lead-safe or lead-free certification for most rentals built before 1978, provided to tenants at lease signing.
Pennsylvania does not have rent control, but Philadelphia has added good cause protections for many tenants and requires certain notices before non-renewal. Check the current rules before you plan turnover.
Zoning matters on conversions. Many rowhouse blocks are zoned for one or two units, and a building with more units than its zoning and certificate allow can be hard to finance. Confirm the legal unit count with the zoning permit history.
This example is illustrative and not a quote. An investor buys a 6-unit divided twin in Spruce Hill for $1,050,000. The units rent for about $1,550 each, or $9,300 a month. Taxes are budgeted at $1,225 a month and insurance at $600.
At 75% LTV, the loan is $787,500. On a 30-year fixed, principal and interest is about $5,506, the full payment with taxes and insurance is about $7,331, and DSCR is about 1.27x. At 70% LTV, the loan is $735,000, principal and interest is about $5,139, the payment is about $6,964 and DSCR is about 1.34x.
Both loans clear 1.0x. The bigger number in this deal is cash to close: at the 70% loan you bring about $52,500 more in down payment, and either way your share of the transfer tax is a significant line on the settlement statement.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Gross monthly rent | $9,300 | $9,300 |
| Loan amount | $787,500 | $735,000 |
| Principal and interest | $5,506 | $5,139 |
| Property taxes | $1,225 | $1,225 |
| Insurance | $600 | $600 |
| Total monthly payment | $7,331 | $6,964 |
| DSCR | About 1.27x | About 1.34x |
Century-old twins and rowhouses commonly have flat or low-slope roofs, shared party walls, older electrical service and aging boilers. Fire code rules for multi-unit buildings can require alarms, fire-rated doors and a second means of egress.
The items below cover most of what we ask for on a building this size.
We lend on 5-8 unit rentals across Philadelphia and the nearby suburbs in Delaware, Montgomery and Bucks counties. Our investor loans are business-purpose loans on non-owner-occupied property.
Get a quote through the form below or call (877) 298-1001. Share the rent roll, the price or current value and your target loan amount, and we will run the ratio at a few loan sizes on realistic tax and insurance numbers. If the building is not yet stabilized, ask about bridge financing with a planned refinance into a DSCR loan.
The combined city and state rate is over 4% of the price, customarily split between buyer and seller. Confirm the current rate and the split in your agreement of sale.
You need one to rent and to collect rent in Philadelphia. Plan to apply right after closing and keep lead certifications ready for tenants.
We underwrite the legal unit count. Extra units without permits generally cannot be counted, and they may create code and insurance problems.
Residential. We treat buildings of 1 to 8 units as residential and finance them with DSCR loans that qualify on rent. Buildings with nine or more units move to commercial multifamily financing.
No. A DSCR loan qualifies on the building's rent, with no W-2s or tax returns. You will need a 620 or higher credit score, the rent roll and leases, and bank statements showing down payment and reserves.
There are options. A lower loan amount raises the ratio, sub-1.0 DSCR programs exist for buildings that are close, and rents that are below market can sometimes be addressed at lease renewal before a refinance.
No. Our investor loans are business-purpose loans on non-owner-occupied property, so the building you finance with us cannot be your home.
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