Five- to eight-unit buildings sit in a useful middle ground: more rent per closing than a duplex, but still financed as residential property. On the Seacoast they are mostly converted older houses and small walk-ups, and they rarely come to market.
In short: LendingStreet finances 5 to 8 unit residential buildings in Portsmouth and the Seacoast with DSCR loans that qualify on the combined rent of all units. Loans start at $150,000 with no stated maximum, the standard minimum DSCR is 1.0x and the minimum credit score is 620. Maximum LTV on 5-8 unit properties can be lower than on 1-4 units and varies by program.
In Portsmouth, most five- to eight-unit buildings are large 19th-century houses that were divided into apartments decades ago, in the West End, the North End and along streets near downtown. They tend to have small units, shared basements and older systems.
Dover, Rochester and Somersworth have more purpose-built small apartment buildings near their downtowns and former mill districts, along with big multi-family houses that were converted over time. Prices per unit there are usually well below Portsmouth's.
Somersworth and Rochester also have some newer small buildings and garden-style complexes with five to eight units that were built for local workforce housing. These usually have simpler systems and fewer code questions than converted houses.
Exeter and Newmarket have a smaller number of five- to eight-unit buildings, often near their downtowns and former mills, and they rarely change hands.
Buildings with nine or more units are commercial loans. Five to eight units stay in the residential DSCR world, which means the loan qualifies on rent, not on your tax returns, and can have a 30-year term. You get the scale of a small apartment building with simpler underwriting than a commercial loan.
Residential DSCR underwriting also tends to move faster than a commercial review, and the paperwork is simpler. For many Seacoast investors, a six- or eight-unit building is the natural next step after a few two- and three-families.
Max LTV on 5-8 unit properties can be lower than on single-family homes and varies by program. Plan for a larger down payment and more reserves. The combined rent of all units must cover the full payment at the program minimum, and vacant units may be counted at market rent on some programs.
Appraisers often use both the sales of similar buildings and an income approach on five- to eight-unit properties. Be ready to share a rent roll and expense history, because those numbers support the value as well as the ratio.
This example is illustrative and not a quote. An investor buys a Dover six-unit for $1,150,000. Each unit rents for $1,650, so total rent is $9,900 a month. Taxes are budgeted at $1,750 a month and insurance at $420.
At 70% LTV the loan is $805,000. Estimated principal and interest on a 30-year term is about $5,629, the full payment is about $7,799, and DSCR is about 1.27x. The cushion matters on an older building, where a boiler or roof can eat a year of cash flow.
If the seller's rents are below market, the ratio at purchase may be lower than it will be after renewals. Some buyers start with a bridge loan, raise rents at turnover and then refinance into a DSCR loan once the building is producing its full income.
| Item | Amount |
|---|---|
| Purchase price | $1,150,000 |
| Loan at 70% LTV | $805,000 |
| Estimated principal and interest | $5,629 |
| Taxes | $1,750 |
| Insurance | $420 |
| Total payment | $7,799 |
| Rent, six units | $9,900 |
| DSCR | 1.27x |
Converted buildings raise questions an appraiser and insurer will ask about. Check them before you sign.
Ask the city or town for the building's permit history. Units added without permits years ago can create problems with the appraisal, the insurer and the legal unit count, and correcting them can take time and money. Confirming the history early protects both your loan and your plan.
Older Seacoast buildings often have one boiler and owner-paid heat, which raises winter costs. Water and sewer bills may be the owner's as well. These do not change the DSCR formula, but they decide whether the building actually makes money. Ask for two years of utility bills.
Many Seacoast buyers plan to convert from owner-paid to tenant-paid heat over time by adding separate systems. That can improve cash flow, but it is a capital project. Budget it as one, and do not count savings until the work is done.
Because these buildings are scarce, many trade off-market through local owners, estates and property managers. When one appears, sellers often prefer buyers who can show financing quickly. Getting a term sheet before you make an offer, with your rent assumptions and expense estimates checked, puts you in a better position. If the building needs work first, a bridge loan can buy it now and a DSCR loan can take it out once it is leased.
Five- to eight-unit buildings can also be refinanced later for cash once values and rents rise, or combined with other rentals in a blanket portfolio loan. For buildings with nine or more units, see our multifamily loans page.
If you own five or more rentals in the Seacoast, a blanket portfolio loan can combine a 5-8 unit building with smaller properties under one loan and one payment, qualified on the combined cash flow of the portfolio.
Send the rent roll, operating expenses, price and address. Our investor loans are business-purpose loans on non-owner-occupied property. Call (877) 298-1001 or use the form below.
Residential. Properties with 1-8 units qualify for DSCR loans; nine or more units are commercial.
More than on a single-family home. Max LTV on 5-8 unit properties can be lower and varies by program.
On some programs, vacant units can be counted at market rent. Leases on occupied units carry the most weight.
No. The loan qualifies on combined rent, credit and reserves.
Yes, if the unit count is legal and the building meets code and insurance requirements.
It changes your operating costs, not the DSCR formula. Owner-paid heat can make a building look better on paper than it performs.
Yes. LLC borrowers are standard.
Nine or more units is a commercial loan. See our multifamily loans page for those properties.
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