A five-to-eight unit building in Stockton sits in an odd spot: too big for most single-family investors, too small for many apartment lenders. It is still residential for DSCR purposes, which means it can qualify on its combined rent with 30-year financing.
In short: LendingStreet finances 5-8 unit residential buildings in Stockton with DSCR loans that qualify on the combined rent of all units, with no W-2s or tax returns. Loans start at $150,000 with no stated maximum, the standard minimum DSCR is 1.0x, the minimum credit score is 620 and LLC borrowers are standard. Maximum LTV on 5-8 unit properties can be lower than on a single-family home and varies by program. Buildings with nine or more units are commercial.
Most of Stockton's small apartment buildings are in the older core: Midtown, the blocks around the Miracle Mile and University of the Pacific, the Magnolia district, Fair Oaks and the east side. Many are 1950s-1970s two-story walk-ups with a parking court, some are converted older houses with units added over the years, and a few are newer infill buildings.
Tenants include university students and staff, hospital workers downtown and households priced out of single-family rentals. Rents per unit are lower than for a house, but the combined rent of six or eight units can support a meaningful loan.
Buildings in this size range rarely trade on the open market as often as houses, and many are sold by long-time owners who self-managed. Expect paper records, handwritten leases and expense numbers that need verifying. The cleaner you make the rent roll before applying, the smoother the underwriting.
Investors who start with duplexes and fourplexes in Stockton often move into the 5-8 unit range as their next step because the price per unit can be lower and one building is easier to manage than several scattered houses.
The DSCR math is the same idea: combined rent divided by principal, interest, taxes, insurance and any HOA. What changes is the detail.
| Item | Single-family rental | 5-8 unit building |
|---|---|---|
| Income used | One lease or market rent | Combined rent roll for all units |
| Max LTV | Up to 80% purchase | Often lower; varies by program |
| Expenses in the payment | Taxes, insurance, HOA | Taxes, insurance and often owner-paid utilities |
| Appraisal | Single-family comps | Small income property comps and rent survey |
| Condition review | Basic | Roof, fire safety, separate meters, deferred maintenance |
This example is illustrative and not a quote. An investor buys a 1960s six-unit building for $1,080,000. Each unit rents for about $1,525, so gross rent is $9,150 a month. Taxes on the new purchase price are budgeted at about $1,035 a month, insurance at $520 and owner-paid water, sewer and trash at $300.
At 70% LTV the loan is $756,000, with estimated principal and interest of about $5,260. The total monthly payment used here is about $7,115, and DSCR is about 1.29x, above the 1.0x standard minimum. A building with one long-vacant unit or several leases far below market would score lower, which is when a bridge loan to stabilize it first can make sense.
Most Stockton multi-unit buildings older than 15 years fall under California's AB 1482, which limits annual rent increases to 5% plus inflation with a 10% ceiling and requires just cause for terminating many tenancies. When you buy a building with below-market rents, plan on raising them over years, not months.
That is why we look at the actual rent roll and leases. Bring every lease, a recent rent ledger and a list of any units on month-to-month terms.
Some older Stockton buildings share a water meter or a single boiler, so the owner pays utilities that a tenant would pay in a house. Those costs reduce cash flow and, on some programs, are counted in underwriting. Separate electric meters are common; separate water meters are less so.
Expect an inspection to look at the roof, smoke and carbon monoxide alarms, exterior stairs and balconies, and any signs of unpermitted units. California has inspection requirements for exterior elevated elements such as balconies on many multi-unit buildings; ask whether the building is covered and whether inspections are current.
Ask the seller for a history of capital work: when the roof was replaced, when water heaters and HVAC units were updated, and whether any units were added later. A building with unpermitted units can be valued on fewer units than it physically has, which changes the loan size.
Insuring a 5-8 unit building in California can take more shopping than a house, and premiums have risen. Get a quote early. If the building is in a mapped flood zone behind the Delta levees, flood coverage is required and should be part of your DSCR payment.
A fourplex qualifies under 2-4 unit rules; a fiveplex moves into the 5-8 unit category, often with lower maximum leverage. Some Stockton investors buy two fourplexes instead of one eightplex for that reason, while others prefer one roof and one property tax bill. Run both.
Another difference: the appraisal on a 5-8 unit building weighs income more heavily than a house appraisal does. Comparable sales of similar small apartment buildings in Stockton are fewer, so the appraiser may reach into nearby areas. Strong, documented rents help support the value.
Stockton's small apartment stock includes buildings constructed before modern seismic and fire codes. Ask whether any retrofit work has been done, whether smoke alarms and fire extinguishers meet current requirements and whether the city has open notices on the property. Those items affect insurance, the inspection and sometimes the appraisal.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the rent roll, leases, price and expense details through the form below or call (877) 298-1001. We will size the loan on the building's combined rent and tell you where leverage lands for that unit count.
For our DSCR programs, 5-8 unit buildings are residential. Nine or more units are commercial; see our multifamily loans page.
Loans start at $150,000 with no stated maximum. Maximum LTV is often lower than on 1-4 unit properties and varies by program.
On some programs they are included in underwriting. Either way they reduce cash flow, so include them in your analysis.
Many multi-unit buildings older than 15 years are covered. It limits annual increases and adds just-cause rules. Confirm with counsel.
Yes. LLC borrowers are standard on our DSCR loans.
The DSCR may be calculated on market rent on some programs, but a building with several vacancies often fits a bridge loan first, then a DSCR refinance.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
It depends on leverage, management and price per unit. Fourplexes use 2-4 unit rules, which can allow higher leverage, while an eightplex puts everything under one roof. Run both.
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