Buying a 5 to 50 unit apartment building is underwritten on the building's net operating income. The seller's numbers start the conversation; the lender's version of NOI decides the loan.
In short: LendingStreet finances apartment acquisitions of 5 to 50 units with loans from about $1M to $5M+, underwritten on the property's net operating income (NOI) rather than your personal income. The lender rebuilds NOI from the trailing 12-month operating statement (T-12) and the current rent roll, applies vacancy and expense assumptions, and sizes the loan to the lower of a leverage limit and a debt coverage test. Leverage varies by program and is often lower on larger balances. Expect reserves, third-party reports and a more structured process than a 1-4 unit purchase, so build those steps into your contract timeline.
Our small multifamily page covers why 5 to 20 unit buildings fall between residential and institutional lending. This page is about the acquisition itself at larger balances: what to request from the seller, how the lender rebuilds the numbers, and how a $1M to $5M+ loan is sized and closed.
Five units is where a property becomes commercial multifamily. From there up, the building's NOI carries the loan. Your credit, liquidity and experience still matter, but there is no personal income test and no W-2s or tax returns used to qualify you. Apartment purchases also follow a more formal path than house purchases, and knowing the order helps you set realistic deadlines in your purchase agreement.
The T-12 is the seller's income and expense statement for the last 12 months. Underwriters compare it to the rent roll, bank deposits and tax and insurance bills. One-time items get removed, missing expenses get added, and below-normal expenses get raised to a realistic level.
Watch for missing management fees on self-managed buildings, repairs paid personally by the seller, and insurance that will reprice at sale. Property taxes may also be reassessed after a purchase in some states, so underwriting often uses an estimate based on your price rather than the seller's bill.
Some programs compare the trailing three months to the full 12. If income is rising, recent months may help. If it is falling, the lender will likely use the lower figure.
The rent roll lists every unit with tenant, rent, lease dates, deposit and balance owed. Lenders size on actual current rent, meaning rent tenants actually pay today. Pro forma rent, the rent you plan to charge after renovations, generally does not count on a permanent loan.
Check occupancy, concessions, delinquency and how many leases expire soon. A building with several units far behind on rent, or many leases rolling in the same month, will be underwritten more cautiously. Estoppels or lease audits on larger buildings help confirm the rent roll is real.
Expense ratio is operating expenses divided by effective gross income. It varies with the building's age, who pays utilities and local taxes and insurance. A ratio that looks too low compared with similar buildings is a red flag, and underwriting will usually raise it.
Every line matters, but a few are adjusted most often: management, repairs, insurance, taxes and reserves for capital items such as roofs and mechanical systems. Underwriting usually includes a per-unit annual reserve even if the seller never set money aside.
| Line item | Seller's T-12 often shows | Lender's underwriting often uses |
|---|---|---|
| Rental income | Collected rent, sometimes pro forma | Current rent from the rent roll |
| Vacancy and credit loss | Actual, sometimes near zero | Actual or a market minimum, whichever is higher |
| Management | Zero if self-managed | A market management fee |
| Property taxes | Seller's current bill | Estimate based on the new purchase price |
| Insurance | Seller's current premium | A current quote for the new owner |
| Capital reserves | Often not shown | An annual amount per unit |
This example is illustrative and not a quote. An investor buys a 24-unit building for $3,600,000. Each unit rents for $1,350, so gross potential rent is $388,800 a year. Underwriting applies 5% vacancy ($19,440), leaving effective gross income of $369,360.
Underwritten expenses total $151,000: taxes $48,000, insurance $21,600, utilities $26,400, repairs $24,000, management $22,000, administrative $3,000 and capital reserves of $6,000 ($250 per unit). That is an expense ratio of about 41%. NOI is $218,360, a cap rate of about 6.1% on the price.
At a sample 70% LTV, the loan would be $2,520,000. At a sample rate of 6.75% on 30-year amortization, annual debt service is about $196,136, for a DSCR of about 1.11x. If the program in this example required 1.20x, maximum annual debt service would be about $181,967, which supports a loan of about $2,337,900, or roughly 65% of the price. The investor would bring about $1,262,100 plus closing costs.
There are two kinds of reserves. Borrower liquidity is cash you hold after closing, which lenders review to confirm you can carry the building through vacancy or repairs. Requirements are often higher on larger balances.
Capital reserves are amounts the lender builds into NOI, or sometimes collects monthly, for future roof, boiler, parking lot and unit turnover costs. Some programs also hold back funds at closing for repairs the property condition report flags. Ask early so neither surprises you.
Most resizing happens between the first quote and final approval, after third-party reports and a closer look at the numbers. None of these is unusual, and most can be anticipated if you underwrite the building the way the lender will before you sign.
If the loan comes back smaller, the choices are usually a larger down payment, a price renegotiation backed by the new numbers, or a bridge loan if the building needs time to reach its potential. Knowing which levers you have before diligence ends keeps your deposit protected.
If the building has high vacancy, below-market rents or units offline for renovation, current NOI may not support the loan you need. A bridge loan can fund the purchase and give you time to stabilize. Bridge rates start at 7.99%, and some programs can close in as little as 10 days.
Once occupancy and rents are where you want them and you have a few months of operating history, the building can refinance into a long-term multifamily loan sized on the new NOI.
Lenders look at your track record with rentals, and apartment experience helps on larger buildings. First-time apartment buyers can qualify on some programs, often with lower leverage or a professional property manager in the plan.
Most acquisitions close in an LLC or other entity. The owners who control the entity usually sign for the loan, and their credit and liquidity are reviewed. If you are raising money from partners, settle the ownership structure early, because changes late in underwriting slow the file.
Send the seller's package as soon as you have it. The financing team will review your scenario and come back with 2–3 options.
On the building's net operating income. The lender rebuilds NOI from the T-12 and rent roll, applies vacancy and expense assumptions, and sizes the loan to the lower of a leverage limit and a debt coverage test.
Yes. LendingStreet finances 5+ unit apartment purchases, and larger balances are reviewed case by case. The building's NOI and value decide the final loan size.
Generally no on a permanent loan. Underwriting uses current rent from the rent roll. If the plan depends on raising rents, a bridge loan followed by a refinance is a common structure.
It varies with age, utilities, taxes and insurance. Underwriters compare your numbers to similar buildings and raise expenses that look too low. Management and capital reserves are often added even if the seller did not show them.
Experience helps, especially on larger buildings. Some programs work with first-time apartment buyers, often at lower leverage or with professional management.
An appraisal is standard. Some programs also require a property condition report or an environmental review, depending on the building and loan size.
No. The loan qualifies on the property's NOI. You will provide entity documents, proof of down payment and reserves, and credit for the owners who sign.
Two to four units qualify on gross rent against the payment. Five or more units are underwritten on NOI, after vacancy and operating expenses, which changes how much a given rent supports.
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Properties with 5+ units are commercial by definition, so they fall outside Fannie/Freddie residential programs. But at 5-20 units the loan is usually too small for institutional multifamily desks, whose minimums and timelines are built for 50+ unit assets. The result is a financing gap: too big for residential, too small for institutional.
Through DSCR-based and bridge capital sources that underwrite to the property's net operating income rather than agency checklists. Typical structures: purchase or refinance at up to 75% LTV, 5-20 units, $200K-$20M, with bridge-to-perm available for value-add and lease-up plays.
Stabilized small multifamily DSCR loans typically close in 14-21 days. Bridge structures for value-add acquisitions can close in 5-10 days, then refinance into permanent DSCR financing after stabilization.
No. These programs underwrite the property's income (NOI / DSCR), not your tax returns. LLC borrowers are standard, and there is no W2 requirement.
Mixed-use with a residential majority (for example, apartments over retail) can be placed through commercial and mixed-use capital sources through the same LendingStreet application, with custom terms up to $5M+.