Waco's profile rose with Baylor's growth and the Magnolia tourism boom, and small apartment buildings near campus and downtown now attract investors from Dallas and Austin. As everywhere in Texas, property taxes and hail insurance decide how much leverage the rent can carry.
In short: LendingStreet finances 5-8 unit buildings in Waco, Hewitt, Woodway and the rest of McLennan County with DSCR loans that qualify on combined rent, with no W-2s or tax returns and LLC borrowers allowed. Loans start at $150,000 with no stated maximum, and leverage on 5-8 units varies by program. Budget taxes with no homestead exemption and get a realistic wind and hail quote.
The neighborhoods around Baylor have many fourplexes and small buildings with five to eight units, many leasing to students. Sanger Heights and Castle Heights have older buildings that lease to professionals and families.
Downtown has seen new investment near the Magnolia Silos and the riverfront. Hewitt, Woodway and China Spring have newer small buildings, and Bellmead and east Waco offer lower prices.
Many buildings near campus were built in the 1970s and 1980s as student housing, with two-bedroom units and shared parking. Newer purpose-built student complexes compete with them, so updated units and good management matter.
Prices per unit in Waco are generally below Austin and Dallas, which is why investors from both metros buy here. Rents are lower too, so the tax and insurance lines carry a lot of weight.
| Area | Typical building | Tenant base |
|---|---|---|
| Near Baylor | Small buildings and fourplexes | Students |
| Sanger Heights and Castle Heights | Older buildings | Professionals and families |
| Downtown | Newer and renovated buildings | Young professionals |
| Hewitt and Woodway | Newer small buildings | Families and commuters |
Texas has no state income tax, so local property taxes are high. A Waco building can be taxed by the county, the city, the school district, the community college and others.
Investors do not get homestead exemptions. The McLennan County Appraisal District values property annually, and a sale often pushes the next appraisal toward the price. Budget on the full combined rate applied to your price, and protest if the value looks high.
Texas has no transfer tax or mortgage tax.
Some newer subdivisions in Hewitt, Woodway and China Spring also sit in special districts that add to the bill. Look at the full list of taxing units on the appraisal district record.
Five to eight units is the top of the residential range; nine or more units moves into commercial lending. Inside that range the loan is approved on what the building rents for. No W-2s, no tax returns, a 620 minimum score, LLC ownership allowed, $150,000 minimum loan size with no stated maximum, and 30-year terms available.
The test is simple: total rent from all units divided by principal, interest, taxes and insurance. Most programs look for 1.0x or better, and sub-1.0 programs can work when the numbers are close. Purchase leverage can reach 80% LTV and cash-out 75% on smaller rentals, but on 5-8 unit buildings the maximum is often lower and varies by program.
The rent roll does a lot of the work. The appraiser checks every unit's rent against comparable rentals, and income that looks out of line with the area gets a closer look. Vacant or down units need a realistic rent and a plan for getting them leased.
Central Texas gets hail and severe storms, and insurance costs across Texas have risen. Many policies have percentage-based wind and hail deductibles.
Buildings near the Brazos and Bosque rivers can be in flood zones. Get a full-building quote and the flood determination early.
Foundation movement in Central Texas clay soils is another issue. Look for cracks and doors that stick, and get an inspection.
This example is illustrative and not a quote. An investor buys a six-unit building near Baylor for $720,000. The units rent for $1,000 each, for a combined $6,000 a month. Taxes are budgeted at $1,300 a month and insurance at $550.
A 75% LTV loan of $540,000 carries estimated principal and interest of about $3,776. Add taxes and insurance and the payment is about $5,626, a DSCR of about 1.07x. At 70% LTV, the $504,000 loan has a payment of about $5,374 and a DSCR near 1.12x. Taxes take a large share of the rent, but the building still clears 1.0x at both leverage levels.
| Item | 75% LTV | 70% LTV |
|---|---|---|
| Purchase price | $720,000 | $720,000 |
| Combined monthly rent | $6,000 | $6,000 |
| Loan amount | $540,000 | $504,000 |
| Estimated principal and interest | $3,776 | $3,524 |
| Taxes and insurance | $1,850 | $1,850 |
| Total monthly payment | $5,626 | $5,374 |
| DSCR | About 1.07x | About 1.12x |
Baylor students often lease by the academic year, sometimes by the bedroom. Turnover is concentrated in summer, and pre-leasing for the next year starts early.
Check city occupancy limits on unrelated tenants and whether leases are by the unit or by the bedroom.
Leases signed for the next school year can support the rent roll if they are signed and in place. Bring copies.
Waco requires short-term rental permits, and rules differ by zoning district. Magnolia tourism has driven STR demand, but most 5-8 unit buildings are underwritten on 12-month leases.
Check city rules before counting on nightly income.
Some zoning districts limit STRs to owner-occupied properties or require special permits. Check the city's current rules.
Tourist demand is seasonal and tied to events at Baylor and downtown attractions. Long-term leases give steadier income for a DSCR loan.
A clean package gets a faster answer on a small apartment building.
LendingStreet makes business-purpose DSCR loans on non-owner-occupied rentals. Our investor loans are business-purpose loans on non-owner-occupied property, and we review 5-8 unit buildings across the Waco area.
Share the rent roll, the address and your target leverage in the form below or by phone at (877) 298-1001. We will size the loan at more than one LTV so you can see the tradeoff. Our Texas 5-8 unit DSCR page covers the statewide picture.
Texas relies on property taxes, and investors do not get homestead exemptions.
Yes, with the McLennan County Appraisal District each year.
Yes, if it has 5-8 units and the leases support the payment.
Yes. Check city rules for your zoning district.
Yes. We finance 5-8 unit buildings across McLennan County.
Eight units. Up to eight units fits our residential DSCR programs; nine or more is commercial multifamily.
No. The loan qualifies on the building's rent. There are no W-2s or tax returns, and the minimum credit score is 620.
Sometimes. Sub-1.0 DSCR programs are available, and putting more down is the other common fix.
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