Madison's rental market is shaped by water and a university. The isthmus between Lakes Mendota and Monona limits how much housing can be built near downtown, and UW-Madison keeps thousands of renters looking for a lease every year.
In short: LendingStreet finances 1-8 unit rentals in Madison and across Dane County with DSCR loans that qualify on the property's rent, with no W-2s or tax returns. Loans start at $150,000 with no stated maximum, purchases go up to 80% LTV, the standard minimum DSCR is 1.0x and the minimum credit score is 620. LLC borrowers are standard and 30-year terms are available.
On the east side, the Marquette, Williamson (Willy Street), Atwood, Tenney-Lapham and Emerson East neighborhoods are full of older two-flats and small frame houses that lease to young professionals and graduate students. Near campus, Regent, Vilas, Greenbush and the blocks around Langdon Street are dominated by student rentals.
Outside the isthmus, the Northside, Hawthorne and Lake Edge offer lower prices and family tenants, and the suburbs of Sun Prairie, Fitchburg, Middleton and Verona have newer homes and townhomes near major employers.
| Area | Typical rental | Tenant base | Watch item |
|---|---|---|---|
| Marquette, Atwood, Tenney-Lapham | Older two-flats and small houses | Young professionals, grad students | Age of systems, small lots |
| Regent, Vilas, Langdon | Converted houses and small buildings | UW students | August 15 turnover, wear |
| Northside, Hawthorne, Lake Edge | Postwar homes and duplexes | Families, workforce | Lower rents, steady demand |
| Sun Prairie, Fitchburg, Verona | Newer homes and townhomes | Professionals, families | HOA rules, higher prices |
A two-flat has one apartment on each floor, usually with separate entrances and often separate furnaces and meters. They are common on the east side and the Northside, and they suit DSCR lending well because the loan qualifies on the combined rent of both units.
Older two-flats need the usual checks: roof, foundation, wiring, the age of each furnace and whether the units were ever converted from a single-family home. A clean inspection report helps with insurance and the appraisal. Some east side two-flats also have a finished attic or a basement unit; count that rent only if the city recognizes the unit as legal.
This example is illustrative and not a quote. An investor buys an Atwood-area two-flat for $455,000. The lower unit leases for $1,850 and the upper for $1,750, so rent is $3,600 a month. Taxes are budgeted at $730 a month and insurance at $160.
At 75% LTV the loan is $341,250, estimated principal and interest is about $2,386, the payment is about $3,276 and DSCR is about 1.10x. At the 80% purchase maximum, DSCR falls to about 1.05x; at 70% it rises to about 1.15x. Madison's tax line is a big part of why the ratio moves so much.
| Item | 80% LTV | 75% LTV | 70% LTV |
|---|---|---|---|
| Loan amount | $364,000 | $341,250 | $318,500 |
| Estimated principal and interest | $2,545 | $2,386 | $2,227 |
| Taxes and insurance | $890 | $890 | $890 |
| Total monthly payment | $3,435 | $3,276 | $3,117 |
| DSCR at $3,600 rent | About 1.05x | About 1.10x | About 1.15x |
Wisconsin relies heavily on property taxes, and Madison bills are substantial. The City of Madison updates assessments frequently, so a recent purchase price can show up in the next assessment rather than years later. Budget on taxes at your purchase price, not on the seller's old assessment.
The Wisconsin lottery and gaming credit applies only to an owner's primary residence, so a bill that showed the credit for the seller will not show it for you. Check the full tax bill with the City of Madison or the suburb's treasurer.
Much of Madison's rental market, especially near campus and on the isthmus, turns over on or around August 15. Leases for the next year are often signed months in advance, and a unit that is not leased by spring can be hard to fill until the following cycle.
For a DSCR purchase, that means timing. Buying a building with signed leases for the coming year gives you documented rent for underwriting. Buying one with vacant units in late summer may leave you carrying empty space for months.
Madison generally allows short-term rentals only in a host's primary residence, with a license, which rules out a non-owner-occupied short-term rental in the city. Confirm current rules with the city before you consider nightly rentals.
Investors who want short-term rentals in Wisconsin often look at areas such as the Wisconsin Dells, Door County or lake communities where local rules allow them. Some of our short-term rental programs can qualify on projected revenue where the use is legal; see our Wisconsin short-term rental page.
Wisconsin landlord-tenant law is set largely at the state level, including rules on security deposits, check-in sheets and required disclosures, and state law limits how far cities can regulate rentals. Madison still has local requirements, so check with the city before you buy.
Wisconsin charges a real estate transfer fee of $3 per $1,000 of value, typically paid by the seller, and there is no mortgage recording tax. Buyers mainly pay title, recording and lender costs.
Madison winters are long and cold. Ice dams, frozen pipes in vacant units and aging furnaces are the claims insurers worry about in older two-flats. Updated electrical service, a newer roof and well-maintained heating systems all help with insurance pricing, and some insurers ask for the age of each furnace in a two-flat. Some properties near the lakes and low-lying areas saw flooding in 2018; check the flood map and ask about flood history.
Send LendingStreet the address, price, rents and your target leverage. We will run the ratio at a few loan amounts and show you the options. For statewide context, see our Wisconsin DSCR page. If you are buying near campus, tell us where the building stands on next year's leasing.
Yes. Two-flats are one of the most common Madison rentals we see, and the loan qualifies on the combined rent of both units.
Because so many Madison leases turn over around August 15. Signed leases for the coming year document the rent, while vacant units in late summer may sit empty for months.
Possibly. Madison updates assessments frequently, and the lottery and gaming credit only applies to an owner's primary residence. Budget on your purchase price.
Madison generally allows short-term rentals only in a host's primary residence. Investors seeking STRs usually look elsewhere in Wisconsin where local rules allow them.
Yes. We lend throughout Dane County, including Middleton, Sun Prairie, Fitchburg, Verona, Waunakee and Monona. Newer suburban homes and townhomes may have HOA leasing rules, so review them before you buy.
Wisconsin charges a transfer fee of $3 per $1,000 of value, usually paid by the seller. There is no mortgage recording tax, so a buyer's closing costs are mainly title, recording and lender fees.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
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