A five- to eight-unit building sits in an awkward spot for many lenders: too big for the usual 2-4 unit programs, too small to justify a full commercial loan. LendingStreet treats 1 to 8 units as residential, so these buildings are underwritten on their rent with a DSCR loan.
In short: Yes. LendingStreet finances 5 to 8 unit rental buildings with DSCR loans that qualify on the building's rent, not your tax returns, starting at $150,000 with no stated maximum. Purchases can go up to 80% LTV and cash-out up to 75%, though maximum leverage on 5-8 units varies by program and is often lower than on a house. LLC borrowers are standard, the minimum credit score is 620 and the standard minimum DSCR is 1.0x.
For our programs, a property with five, six, seven or eight dwelling units on one parcel is residential. That includes small walk-up apartment buildings, six-family houses, converted mansions and rowhouses split into flats, and small courtyard buildings. Nine or more units moves into commercial multifamily lending, covered on our multifamily loans page.
Mixed-use buildings with storefronts below apartments are usually handled differently, since part of the income is commercial. If your building has a retail space, mention it up front.
Five to eight units is often the first step past a fourplex. Rents across several units smooth out a single vacancy, management is still hands-on, and pricing per unit is often lower than for 2-4 unit properties that compete with owner-occupant buyers.
A DSCR loan lets the building's income do the qualifying. You do not need W-2s or tax returns, the loan can be held in an LLC and 30-year terms are available, which keeps the payment manageable compared with shorter commercial terms.
The debt service coverage ratio is the building's monthly rent divided by the full monthly payment: principal, interest, taxes, insurance and any association dues. Standard programs look for 1.0x or better, and sub-1.0 programs exist for buildings that are close. The loan amount is the lower of what the LTV limit allows and what the rent supports.
| Item | Typical terms on 5-8 units |
|---|---|
| Loan amount | From $150,000, no stated maximum |
| Purchase LTV | Up to 80%, often lower on 5-8 units; varies by program |
| Cash-out LTV | Up to 75%, often lower; 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 |
| Term | 30-year available |
On a house, the appraiser leans mostly on comparable sales. On a 5 to 8 unit building, the income approach carries more weight: the appraiser estimates market rent for each unit, deducts vacancy and typical expenses and converts that income into a value using what similar small buildings are selling for relative to their income.
The appraiser reconciles that with sales of comparable small buildings. If the rents are below market, the appraisal may show upside, but the loan is still sized on the rent the program allows, which is often the lower of actual and market rent.
Underwriting works from a current rent roll listing each unit, its size, the tenant's rent, the lease start and end dates and any deposits. Signed leases back up the rent roll. Month-to-month tenants are common in small buildings and are often accepted, but they get closer scrutiny.
Vacant units are usually counted at the appraiser's market rent. If several units are vacant or the building needs work before it can be leased, a bridge loan and a later refinance into a DSCR loan may fit better. Recent bank deposits showing rent collection can help when leases are informal.
This example is illustrative and not a quote. An investor buys a seven-unit building for $980,000. Each unit rents for $1,300 a month, so gross rent is $9,100. Taxes are $12,000 a year and insurance is $8,400 a year.
At 75% LTV the loan is $735,000. On 30-year amortization, principal and interest is about $5,139. Adding $1,700 for taxes and insurance brings the payment to about $6,839, for a DSCR of about 1.33x. If the program capped this building at 70% LTV, the loan would be $686,000 and the ratio would rise to about 1.40x, with $294,000 down instead of $245,000.
| Item | At 75% LTV | At 70% LTV |
|---|---|---|
| Loan amount | $735,000 | $686,000 |
| Down payment | $245,000 | $294,000 |
| Principal and interest | About $5,139 | About $4,797 |
| Taxes and insurance | About $1,700 | About $1,700 |
| Total payment | About $6,839 | About $6,497 |
| DSCR at $9,100 rent | About 1.33x | About 1.40x |
Taxes and insurance are inside the DSCR payment, and on a 5-8 unit building both are larger lines than on a house. Get a whole-building insurance quote and a tax estimate based on your purchase price, since reassessment after a sale is common.
Owner-paid utilities, common-area electricity, snow removal, trash and maintenance are not in the DSCR payment, but they come out of your cash flow. Know which utilities tenants pay before you buy.
Older buildings also carry capital items: roofs, boilers, porches and electrical service. Lenders typically want to see reserves after closing, and a building with a failing system may need repairs before it will insure or appraise well.
These loans fit investors who own or are buying stabilized small buildings and want to qualify on rent. Our investor loans are business-purpose loans on non-owner-occupied property, so a building where you plan to live in one unit is not eligible.
They also fit investors refinancing a building they bought with a bridge loan once it is leased up, and owners pulling cash out of a building they have held for years to fund the next purchase. Short-term rental operators can sometimes qualify on projected income on some programs.
They fit less well when the building is mostly vacant, needs a major renovation, has significant commercial space or has nine or more units. In those cases we can talk through bridge or commercial options. Call (877) 298-1001 or use the form below to get a quote.
Pulling these together before you apply keeps the appraisal and underwriting moving.
Yes. LendingStreet treats 1 to 8 units as residential, so a 5 to 8 unit building is underwritten as a rental on its rent. Nine or more units is commercial.
Program maximums are up to 80% on a purchase and 75% on cash-out, but leverage on 5-8 units is often lower and varies by program and loan size.
No. The loan qualifies on the building's rent. You still need a 620 or higher credit score and reserves.
With more weight on the income approach than a house, plus sales of comparable small buildings. The appraiser estimates market rent for each unit.
Often, with vacant units counted at market rent. If several units are vacant or need work, a bridge loan first may fit better.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
Yes. LLC borrowers are standard, and you sign for the loan personally as the member.
Sub-1.0 DSCR programs exist for buildings that come up a little short, usually with lower leverage.
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