Sioux Falls has grown into one of the fastest-growing small metros in the Plains, and its older neighborhoods have a steady supply of sixplexes and eightplexes. Rapid City and the college towns add more.
In short: Yes. LendingStreet finances 5 to 8 unit rental buildings in South Dakota with DSCR loans that qualify on the building's rent, 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 the minimum credit score is 620, while maximum LTV on 5 to 8 units can be lower than on 1 to 4 units and varies by program. In South Dakota, property taxes, hail and winter operating costs matter more than closing costs, which are modest.
Sioux Falls has small buildings in the older neighborhoods around downtown, near Augustana University and the University of Sioux Falls, and along older corridors such as Minnesota Avenue. Many are 1960s to 1980s two-story walk-ups with six or eight units and surface parking. Newer small complexes sit on the growing edges of the city.
Rapid City has small buildings near downtown and South Dakota Mines, with demand from Ellsworth Air Force Base, health care and Black Hills tourism. Brookings, Vermillion, Aberdeen and Mitchell have smaller numbers, often tied to South Dakota State, the University of South Dakota and Northern State.
| Area | Typical buildings | What to check |
|---|---|---|
| Sioux Falls core and campus areas | 1960s to 1980s walk-ups | Roofs, hail history, boilers |
| Rapid City | Small complexes near downtown and base | Tourism-related turnover, winter |
| Brookings, Vermillion, Aberdeen | Student-oriented buildings | Lease cycles, summer vacancy |
The ratio is simple: total monthly rent from all units divided by the monthly payment, which includes principal, interest, property taxes, insurance and any HOA dues. On standard programs it has to reach 1.0x, and a higher ratio can improve terms. Sub-1.0 programs exist for buildings that fall a little short.
Appraisers on 5 to 8 unit buildings usually look at both comparable sales and the income the building produces, and they give an opinion of market rent for each unit. If the in-place rents are well below market, underwriting generally works from the leases you actually have, so a building with old below-market leases may size smaller than its potential suggests.
For our programs, 5 to 8 units is still residential, so the loan is underwritten like a larger version of a fourplex loan rather than a commercial apartment loan. The difference is that maximum LTV can be lower on 5 to 8 unit properties and on larger balances, and reserve requirements can be higher. Both vary by program.
| Term | What to expect |
|---|---|
| Property type | 5 to 8 unit residential rental |
| Loan amount | From $150,000, no stated maximum |
| Purchase LTV | Up to 80% on some programs; often lower on 5-8 units |
| Cash-out LTV | Up to 75%; varies by program |
| Minimum DSCR | 1.0x standard; sub-1.0 programs exist |
| Credit score | 620 minimum |
| Income documents | None; qualifies on rent |
| Borrower | LLC standard; sign for the loan personally |
Eastern South Dakota sees frequent hail and severe summer storms, and Sioux Falls has had several major hail events. Insurers look closely at roof age and claim history, and many policies have wind and hail deductibles. Get your quote during the inspection period.
Winters are cold and windy. Owner-paid heat, snow removal and freeze protection for vacant units are real costs, even though most are not part of the DSCR payment. Ask the seller for a year of utility bills.
South Dakota has no state income tax, and its real estate transfer fee is modest, so closing costs on a 5 to 8 unit purchase are mostly title, recording, appraisal and lender costs. The transfer fee is usually a small line.
Property taxes do much of the work of funding local government and schools, and rates vary by county and school district. Owner-occupied homes are taxed at a lower rate than other residential property, so a rental can carry a higher bill than the seller's if the seller lived in one of the units. Use the county director of equalization's figures.
This example is illustrative and not a quote. An investor buys a Sioux Falls eight-unit building for $760,000. Each unit rents for about $950 a month, so gross rent is $7,600. Property taxes are budgeted at $900 a month and insurance at $450. The owner also pays about $375 a month in utilities and common-area costs, which affect cash flow but are not part of the DSCR payment.
At 75% LTV the loan is $570,000. On 30-year amortization, principal and interest is about $3,986, so the payment with taxes and insurance is about $5,336 and the DSCR is about 1.42x.
That clears the 1.0x standard minimum. After the owner-paid costs, about $1,889 a month is left before vacancy, repairs and management, which is why a realistic expense budget matters as much as the ratio.
| Item | 75% LTV |
|---|---|
| Purchase price | $760,000 |
| Gross monthly rent | $7,600 |
| Loan amount | $570,000 |
| Principal and interest | $3,986 |
| Property taxes | $900 |
| Insurance | $450 |
| Monthly payment (PITI) | $5,336 |
| DSCR | About 1.42x |
South Dakota's landlord-tenant statutes set rules for deposits, notices and entry, and the state does not have local rent control. Evictions move relatively quickly compared with many states, but follow the statute closely.
Buildings near the universities rent on academic-year leases, and some have summer vacancy. In Rapid City, a few small buildings near the Black Hills cater to seasonal workers. Most 5 to 8 unit DSCR loans are underwritten on 12-month leases.
Sioux Falls has added jobs in health care, banking and credit card operations, and its population growth has kept vacancy low. Many investors who start with duplexes and fourplexes move up to 5 to 8 unit buildings here because prices per unit are still moderate.
Rents in Sioux Falls have risen steadily, but not as fast as prices in some neighborhoods. Run the ratio at a few loan amounts, and use in-place rents rather than projected rents.
A complete package gets a faster, clearer answer on a 5 to 8 unit building.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the address, price, rent roll and the loan amount you want. The team will run the ratio on realistic taxes and insurance, check it at a few loan amounts and come back with options, including sub-1.0 DSCR programs where they fit. Use the form below or call (877) 298-1001.
Buildings with nine or more units are commercial; for those, see our multifamily page.
South Dakota charges a modest real estate transfer fee at sale. Your title company will show the amount and who pays it.
Owner-occupied homes are taxed at a lower rate than other residential property. If the seller lived in the building, the bill can rise after you buy.
Mostly through insurance. A newer roof can lower the premium, while an older roof with claims can raise it or increase the deductible.
Yes. Student buildings can qualify on lease income. Expect underwriting to look at lease dates and summer vacancy.
Our DSCR programs have no stated maximum. Loans start at $150,000, and larger balances are reviewed case by case, often with lower maximum LTV.
The standard minimum is 1.0x, meaning rent covers principal, interest, taxes and insurance. Sub-1.0 programs exist for buildings that fall a little short.
Yes. LLC borrowers are standard. You will sign for the loan personally, and you will need the LLC's formation documents and operating agreement.
Yes. Cash-out goes up to 75% LTV, often lower on 5 to 8 units, and the rent has to cover the new payment at the program minimum. Seasoning rules vary by program.
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