In expensive cities, a two-to-four unit building can cost well over $1M while each unit rents for an ordinary amount. That gap is why the coverage ratio, not the leverage limit, usually decides these loans.
In short: LendingStreet finances 2-4 unit rental buildings priced at $1M and up through our DSCR programs, which qualify on the combined rent of all units rather than your income. Purchases go up to 80% LTV and cash-out refinances up to 75%, with maximum LTV often lower on larger balances. In high-cost metros, the rent from each unit often cannot cover a payment sized at full leverage, so the 1.0x standard minimum DSCR is usually what limits the loan. Underwriting also looks closely at vacant units, whether every unit is legal, and the rent the appraiser supports for each one.
Duplexes, triplexes and fourplexes are residential in lending terms. They fit DSCR programs the same way a single-family rental does, with the rent from every unit added together and compared to one payment. Five units and up is a different product underwritten on NOI.
In many coastal and high-cost metros, a fourplex can trade for $1.5M or more, while each unit rents for what a two-bedroom apartment rents for anywhere in that city. Price per unit is high, rent per unit is ordinary, and the gap shows up in the ratio.
That is the main difference from a $1M single-family purchase. With four units, you have four rents to support, four leases to review and four chances for a unit to be vacant, unpermitted or rented below market.
The appraiser completes a rent schedule for small residential income properties that lists each unit, its current lease rent and an estimated market rent. Underwriting then uses the lease rent, the market rent, or the lower of the two, depending on the program and whether the unit is occupied.
Below-market leases are common in buildings owned by one family for a long time. If a unit is leased at $1,900 and market is $2,800, many programs count the $1,900 until the lease turns over. Rent control and tenant protection rules in some cities can keep below-market rent in effect for years. Know the local rules before you assume rents will rise.
Bring a current rent roll, copies of every lease and any rent increase notices already served. Clear unit-by-unit data is the fastest way through review.
Many 2-4 unit buildings in expensive markets are sold by an owner who lives in one unit. That unit is usually delivered vacant at closing. Other buildings have a unit held empty for renovation or a turnover.
For vacant units, programs commonly use the appraiser's market rent estimate. Some programs apply a reduction to vacant-unit rent or limit how many units can be vacant at closing, and a fully vacant building may face lower leverage. Ask how vacant units will be counted before you finalize your offer.
The loan is for investment property only. You cannot move into the vacant unit yourself. If you want to live in one unit of a fourplex, that is an owner-occupied loan, which LendingStreet does not offer.
A building marketed as a fourplex is not always a legal fourplex. Basement units, converted garages and attic apartments are sometimes built without permits. The appraiser is expected to report the legal use, and income from a unit that is not legal may not count.
If one of four units is not permitted, the building may be appraised as a triplex. That can lower both the value and the qualifying rent. Some programs will not finance a property with an illegal unit at all until it is legalized or removed.
Check the certificate of occupancy, the county's unit count and permit history early. Accessory dwelling units are a separate case, and many cities now allow them, but the permit still matters.
Take a building where all four units together rent for less than the payment at 80% leverage. The program allows the leverage, but the rent cannot carry it. The loan size drops until the DSCR reaches the program minimum.
That is normal on $1M+ small multifamily in high-cost metros. It is not a decline; it is a sizing result. Investors who plan for it come to the table with a larger down payment, a realistic rent roll and room in their reserves.
| Factor | Pushes the loan up | Pushes the loan down |
|---|---|---|
| Rent | Leases at or near market | Below-market or rent-controlled leases |
| Vacancy | All units leased | Vacant units counted at a reduced rent |
| Unit count | Every unit legal and permitted | Unpermitted unit excluded |
| Taxes and insurance | Moderate premiums and assessments | High premiums or a tax reassessment on sale |
| Credit | Stronger scores | Scores near the 620 minimum |
This example is illustrative and not a quote. An investor buys a fourplex for $1,600,000. The rent schedule supports $2,600 a month for each unit, or $10,400 in total. Taxes are $1,650 a month and insurance is $450.
At 80% LTV the loan would be $1,280,000. At a sample rate of 7.0% on a 30-year fixed, principal and interest is about $8,516, total PITIA is about $10,616, and the DSCR is about 0.98x. That falls short of the 1.0x standard minimum.
At 75% LTV the loan is $1,200,000. Principal and interest drops to about $7,984, total PITIA to about $10,084, and the DSCR rises to about 1.03x. The investor puts down $400,000 instead of $320,000, and the loan works on a standard program.
Many 2-4 unit buildings in older cities are 80 to 120 years old. Insurers look at roofs, wiring, plumbing and heating systems, and some will not write older knob-and-tube or fuse-box buildings without upgrades. Get a landlord policy quote early.
Property taxes can also change at sale. In some states, a purchase triggers a reassessment, so the seller's tax bill is not the one you will pay. Underwriting usually uses an estimate based on the new price, and so should your numbers.
A $1.2M loan on a fourplex is reviewed like any larger DSCR balance. Reserve requirements are often higher than on a smaller rental, and they are counted in months of the full payment. Some programs also count reserves for other financed rentals you own. Plan for that cash on top of your down payment and closing costs.
Credit starts at a 620 minimum, with better pricing at higher scores. Rates start at 6.125% for well-qualified borrowers, and larger balances are priced case by case. Most investors buy these buildings in an LLC, which is standard on our programs. The owners who control the LLC usually sign for the loan, and their credit and liquidity are part of the review.
Cash-out on a 2-4 unit building goes up to 75% LTV, often lower on larger balances. The rent from all units must cover the new, larger payment at the program minimum. Seasoning rules vary: some programs allow cash-out soon after purchase, and others cap the loan at the purchase price plus documented improvements for a period.
A building where you have raised rents to market and legalized every unit is often a strong cash-out candidate. A rate-and-term refinance is also available if you only want a new rate or a fixed term.
Send the financing team your rent roll and unit details first. We will review your scenario and come back with 2–3 options.
Yes. Two-to-four unit properties qualify on DSCR programs, which have no stated maximum. Larger balances are reviewed case by case, and maximum LTV is often lower as the balance grows.
They add up the rent for every unit, using leases, the appraiser's market rent, or the lower of the two depending on the program, and compare the total to the full monthly payment.
Programs commonly use the appraiser's market rent for vacant units. Some apply a reduction or limit the number of vacant units, so ask before you set your offer.
Often not. If a unit is not legal, the appraiser may value the building with fewer units, and its rent may be excluded. Some programs will not finance the property until the unit is legalized or removed.
In high-cost metros, combined rent often cannot cover a payment sized at 80% leverage at 1.0x DSCR. The loan is sized down until the ratio works. A larger down payment is the usual solution.
Not with LendingStreet. We finance non-owner-occupied investment property only. Living in one unit would require an owner-occupied loan from a consumer mortgage lender.
They can lower qualifying rent if leases are below market, since many programs count current lease rent on occupied units. The building can still qualify if total rent covers the payment.
No. Two to four units are financed on DSCR programs using rent. Buildings with five or more units are financed as multifamily and underwritten on net operating income.
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