Sioux Falls has an unusual number of small apartment buildings: two-story walk-up sixplexes and eightplexes from the 1970s and 1980s on the east and west sides, plus a handful of old houses near downtown cut into five or six units.
In short: LendingStreet finances 5-8 unit residential buildings in the Sioux Falls metro with DSCR loans that qualify on the combined rent of all units, with no W-2s or tax returns. These buildings stay in our residential program, starting at $150,000 with no stated maximum. Max LTV on 5-8 units can be lower than on 1-4 units and varies by program; the standard minimum DSCR is 1.0x.
Many of the city's walk-up eightplexes were built in the same era with similar layouts: two floors, four units per floor, one- and two-bedroom apartments, off-street parking and coin or shared laundry. They are simple to manage and rent to a broad base of workers.
Older houses near downtown that hold five or six units are a different animal. They have character and central locations, but each unit is unique, and the legal unit count needs to match what the city approved.
Buyers for these buildings are mostly local investors, which keeps the market fairly steady. Prices are higher per building than a fourplex, but the cost per door is often lower, and having more units spreads vacancy risk.
On the walk-up buildings, look at the age of the roof, the condition of the parking lot, whether each unit has its own furnace or the building shares a boiler, and whether the laundry is owned or leased.
| Building type | Typical units | Main questions |
|---|---|---|
| 1970s-80s walk-up | 6 or 8 units | Roof, boiler or furnaces, parking lot |
| Converted older house | 5-6 units | Legal unit count, egress, fire separation |
| Newer small building | 5-8 units | Association or assessment costs, newer systems |
Our residential DSCR program covers buildings up to eight units. That means the loan qualifies on the property's rent with a 30-year term option, rather than going through commercial underwriting. Buildings of nine or more units move to our multifamily program.
That difference matters at closing: the file looks at the building's rent and your credit, not your personal income.
We add up the rent from all units and compare it with the full payment: principal and interest, taxes, insurance and any dues. Vacant units are generally counted at market rent supported by the appraisal, though some programs look more closely at occupancy. A building that is mostly leased at market rent gives the cleanest file.
Rents in these buildings usually cluster in a narrow range because the units are so similar. That makes it easier for the appraiser to support market rent, but it also means the building's condition and management matter more than location in setting the rent.
This example is illustrative and not a quote. An investor buys a 1980s eightplex for $885,000. Each unit rents for about $975, so combined rent is $7,800 a month. Taxes at the non-owner-occupied levy are $1,250 a month and insurance is $430.
At 75% LTV the loan is $663,750, estimated principal and interest is about $4,528, the payment is about $6,208 and the DSCR is about 1.26x. If the program caps this building at 70% LTV, the loan is $619,500, the payment is about $5,906 and the ratio is about 1.32x. Either way, the rent covers the payment with room for vacancy and repairs.
This example uses one building's numbers. Your result depends on the purchase price, actual rents, taxes on that parcel and the insurance quote. Use the DSCR calculator to test your own building before you make an offer.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Loan amount | $663,750 | $619,500 |
| Estimated principal and interest | $4,528 | $4,226 |
| Taxes and insurance | $1,680 | $1,680 |
| Total payment | $6,208 | $5,906 |
| DSCR at $7,800 rent | 1.26x | 1.32x |
The DSCR uses the housing payment, but you still pay for heat in buildings with a shared boiler, common-area electric, snow removal, lawn care and turnover. On a 1980s eightplex those can add up. Budget for them so a strong ratio does not hide a thin cash flow.
A good rule is to keep a written operating budget for the building alongside the DSCR calculation. Even a simple spreadsheet with heat, water, trash, snow removal, lawn care, repairs and turnover will show whether the building cash flows the way the ratio suggests.
Walk-up buildings have big roofs, and hail is a real risk in Sioux Falls. Get the insurance quote early, with the wind and hail deductible spelled out. A recent roof makes both the policy and the appraisal easier.
If the building has had hail damage in the past, ask whether the roof was replaced or repaired, and get a copy of any claim. Some insurers look at recent claims when quoting, and a fresh roof helps the appraisal too.
If you own several small buildings in Sioux Falls, a blanket portfolio loan can combine them under one loan with one payment. For a single building, a DSCR loan on its own is usually simpler.
If you are buying your first small apartment building, talk with us early. We can run the numbers at a few leverage levels and show how the ratio changes, so you can set your offer with financing in mind.
Send the rent roll, address and price through the form below or call (877) 298-1001. Our investor loans are business-purpose loans on non-owner-occupied property. See our South Dakota 5-8 unit page for statewide context.
If you are refinancing, include the current loan payoff and any recent improvements, and we will show both rate-and-term and cash-out options for the building.
For our programs, 1-8 units is residential. An eightplex qualifies under our DSCR program; nine or more units is multifamily.
It varies by program and is often lower than on 1-4 units. Up to 80% LTV is the purchase maximum for DSCR loans generally.
Usually at market rent supported by the appraisal, though some programs look closely at occupancy. A mostly leased building is the cleanest case.
No. The loan qualifies on the building's combined rent compared with the full payment.
Yes, if the six units are legal. Confirm the approved unit count with the city first.
It does for your cash flow. A shared boiler is your cost, even though it is not part of the DSCR payment.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
Yes. If the building has vacancies or needs light work, a bridge loan can close the purchase, and a DSCR loan can refinance it once it is leased.
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