San Francisco's 5-8 unit buildings are the classic small apartment: three- and four-story wood-frame walk-ups in the Richmond, Sunset, Mission and Nob Hill. Nearly all predate 1979, and that history is written into every rent roll.
In short: LendingStreet finances San Francisco buildings of 5 to 8 units with residential DSCR loans that qualify on the building's rent roll, with no W-2s or tax returns and LLC borrowers standard. Loans start at $150,000 with no stated maximum, the standard minimum DSCR is 1.0x, and maximum LTV on 5-8 units can be lower than on 1-4 units; it varies by program. Buildings of 9 or more units move to commercial financing.
Our residential DSCR programs cover 1 to 8 units, so a six-unit Inner Richmond walk-up can be underwritten on rent much like a duplex, rather than through a full commercial process. That usually means a simpler file and long-term, 30-year terms. The appraisal still looks at the building's income and comparable sales, and some programs ask for more reserves on these properties.
For buildings of nine or more units, see our multifamily and commercial pages. If you are weighing a seven-unit building against a ten-unit one, the financing path is different enough that it is worth comparing both before you make an offer.
Almost every 5-8 unit building in the city was built before June 1979 and is covered by the Rent Ordinance. Each unit's rent reflects when the current tenant moved in. A unit that turned over recently may lease at market, while a tenant from the 1990s may pay a fraction of it. We qualify on the leases in place.
That makes the rent roll, not the asking price, the core of the file. Ask the seller for move-in dates, current rents, any pending Rent Board petitions, capital improvement passthroughs and estoppel certificates signed by tenants.
This example is illustrative and not a quote. An investor buys a six-unit Inner Richmond building for $2,850,000. The rent roll mixes long-term regulated tenants with recent market leases and totals $17,400 a month. Taxes on the new assessed value are estimated at $2,850 a month and insurance, including the building's master policy, at $950.
At 70% LTV, a loan of $1,995,000 carries an estimated principal and interest payment of $13,273, for a total of $17,073 and a ratio of 1.02x. At 60% LTV, the loan is $1,710,000, the payment is $15,177 and the ratio is 1.15x. The extra margin at 60% gives room for a vacancy or an insurance increase.
| Unit | Status | Monthly rent |
|---|---|---|
| 1 | Long-term regulated tenant | $2,150 |
| 2 | Long-term regulated tenant | $2,400 |
| 3 | Mid-term regulated tenant | $2,600 |
| 4 | Leased at market in the last two years | $3,300 |
| 5 | Leased at market in the last two years | $3,450 |
| 6 | Vacant, leased at market before closing | $3,500 |
| Total | $17,400 |
San Francisco's mandatory soft-story program targeted wood-frame buildings of five or more units with two or more stories over a soft or weak ground floor, typically garages, built for occupancy before 1978. Most covered buildings have completed the work, but confirm the status and get the city's sign-off. An incomplete retrofit is a value and insurance issue.
Inspect the roof, the electrical service, the sewer lateral and any lightwell and stairway conditions. Older buildings often have deferred items that an appraiser and insurer will notice.
Under Prop 13 the building is reassessed to your price, so the tax bill rises from the seller's figure, often sharply on a building that changed hands decades ago. The city's tiered transfer tax is a sizable closing cost on seven-figure buildings as well.
Insurance for small apartment buildings has become more expensive and harder to place in California. Get quotes for the master policy and earthquake coverage early, since both feed directly into the ratio.
Some buyers also budget for a building inspection by an engineer familiar with older San Francisco walk-ups. Foundation settlement, rear stair condition and lightwell drainage are common items, and an engineer's report helps you negotiate and plan reserves.
Rent growth on regulated units is limited to the Rent Board's annual allowable increase plus approved passthroughs, so many owners add value through turnover, legalizing existing unwarranted units where the city permits it, adding ADUs in garages or storage areas, and lowering operating costs.
Legalized or newly added units can add rent. Make sure any new unit is fully permitted before counting on its income in a refinance.
Capital improvement passthroughs approved by the Rent Board can also raise regulated rents over time, within the city's limits. Keep careful records of qualifying work, since documented increases support both the appraisal and a future refinance.
Maximum LTV on 5-8 unit buildings can be lower than on 1-4 units and varies by program. In San Francisco, the ratio usually limits leverage first. Expect reserve requirements to reflect the building's size and the number of units.
Reserves matter more here than in many cities because turnover is slow. A long-term regulated tenant rarely leaves, and when a unit does turn over it may need substantial work before it can lease at market. Budget for that renovation in your reserves rather than counting on it in your rent.
Buyers moving up from a duplex or fourplex should also expect a more detailed appraisal. The appraiser will weigh the income approach more heavily on a six- or eight-unit building and compare it to recent sales of similar walk-ups.
Send the address, price, rent roll with move-in dates and your target leverage through the form below, or call (877) 298-1001. We will size the loan on the actual leases. Our California 5-8 unit page covers statewide terms.
For our programs, 5 to 8 units is residential, financed with a DSCR loan. Nine or more units is commercial.
They lower qualifying rent when tenants pay below market. We use in-place leases, so the rent roll sets the loan size.
It can be lower than on 1-4 units and varies by program. The DSCR test often limits leverage before the LTV cap does.
If the building is covered, we want to see the city's sign-off or a clear plan. It affects value and insurance.
Yes, once it is permitted and leased. Rent from unwarranted units generally does not count.
Yes. LLC borrowers are standard, and you sign for the loan personally.
We may ask for them, and they are good practice in San Francisco. They confirm each tenant's rent and deposit.
Yes. Rate-and-term and cash-out refinances are available on 5-8 unit properties, subject to the DSCR test.
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