Finance small apartment buildings (5–12 units) with DSCR-based loans. No tax returns. Close in as few as 21 days.
Properties with one to four units qualify for residential lending programs. Buildings with fifty or more units attract institutional capital from banks, insurance companies, and agency lenders. But properties with five to twelve units fall into a financing gap: they are classified as commercial real estate, yet they are too small for most commercial lenders to prioritize. The result is that investors targeting this segment often find fewer options, longer timelines, and more friction than the deal warrants.
DSCR-based multifamily loans solve this problem. Instead of requiring personal income documentation, tax returns, or debt-to-income calculations, these loans qualify based on the rental income the building generates. If the property's net operating income covers the debt service, you can qualify. This approach gives investors a clear, efficient path to acquiring, refinancing, or pulling cash out of small apartment buildings without the underwriting complexity of traditional commercial lending.
For investors ready to graduate from single-family rentals to apartment buildings, or for experienced operators adding five-to-twelve-unit properties to their portfolio, this product bridges the gap between residential simplicity and commercial scale.
| Term | Details |
|---|---|
| Property Types | 5-12 unit apartment buildings, mixed-use (majority residential) |
| Max LTV (Purchase / Rate-Term Refi) | Up to 75-80% |
| Max LTV (Cash-Out Refi) | Up to 70-75% |
| Loan Amounts | $250,000 - $5,000,000+ |
| DSCR Minimum | 1.0x - 1.2x (better terms at 1.25x+) |
| Minimum Credit Score | 660 (pricing improves at 700+) |
| Loan Terms | 25-30 year fixed, 5/1 ARM, 7/1 ARM, interest-only options |
| Income Documentation | None — DSCR based (T12 or rent roll may be required) |
| Appraisal | Full commercial appraisal with income approach |
| Reserves | 6-12 months PITI |
| Vesting | LLC, trust, or corporate entity |
| Non-Recourse | Available on loans above approximately $1M |
| Closing Speed | As few as 21 days |
You have built a portfolio of single-family rentals or small multifamily properties and you are ready to scale. A five-to-twelve-unit building lets you add multiple doors in a single transaction, consolidate management, and improve per-unit economics. This loan product gives you financing that works like the DSCR loans you already know, adapted for the commercial classification of five-plus-unit properties.
You prioritize monthly cash flow above all else. Small multifamily buildings with five to twelve units often deliver stronger DSCR ratios than single-family homes because operating expenses are spread across more units and vacancy risk is diversified. If one unit is vacant in a ten-unit building, you still have nine units generating income. This product rewards strong cash flow with better pricing and terms.
You acquire underperforming buildings with below-market rents, deferred maintenance, or mismanagement. After renovating units, improving operations, and raising rents to market, the building's income and appraised value increase significantly. This loan product provides permanent financing after stabilization, allowing you to lock in your forced appreciation and hold the asset long-term with favorable terms.
You are constructing small multifamily buildings designed for the rental market. Once the building is complete and leased up, you need a permanent takeout loan to replace your construction financing. This DSCR-based product qualifies the building on its actual rental income, giving you a seamless transition from construction to long-term hold without income documentation requirements.
Purpose-built for the small multifamily segment that falls between residential and institutional commercial lending. Whether it is a six-unit walk-up or a twelve-unit garden-style apartment, this product is designed for the property type.
No W2s, no tax returns, no personal income verification, and no debt-to-income calculations. Qualification is based on the building's rental income relative to its debt service. If the property cash flows, you can qualify.
Leverage up to 75-80% of the property value on purchases and rate-term refinances, keeping more capital available for your next deal. Cash-out refinances are available at up to 70-75% LTV.
Flexible loan sizing that accommodates everything from a $300,000 six-unit in a secondary market to a $4 million twelve-unit in a major metro. Larger loan amounts may unlock additional benefits including non-recourse options.
Long-term amortization provides payment stability and predictable cash flow. Choose from 25-year or 30-year fixed-rate options to lock in your rate for the life of the loan.
Interest-only payment structures are available for investors who want to maximize cash flow in the early years of ownership. This can be especially valuable for value-add plays where you are renovating and raising rents.
On loans above approximately $1 million, non-recourse structures are available. This means the lender's remedy in the event of default is limited to the property itself, not your personal assets. Standard "bad boy" carve-outs apply.
Buildings with ground-floor retail or commercial space and apartments above can qualify, provided that at least 51% of the building's gross income comes from residential units. This opens up opportunities in urban and neighborhood commercial corridors.
These are business-purpose loans designed for entity ownership. Close in the name of your LLC, corporation, or trust. There is no requirement to hold the loan in your personal name, which supports asset protection and portfolio organization.
If your building includes units operated as short-term rentals through platforms like Airbnb or VRBO, that income can be considered in the DSCR calculation. Documentation typically includes twelve months of booking history or a third-party revenue projection.
Investors familiar with DSCR loans on single-family and small residential properties should understand the key differences when stepping up to five-plus-unit commercial multifamily.
| Factor | 1–4 Unit DSCR | 5–12 Unit Multifamily DSCR |
|---|---|---|
| Classification | Residential | Commercial |
| Appraisal | Standard residential comps | Commercial appraisal (income approach) |
| Income Documentation | Rent roll or lease | T12 income/expense statement |
| Vacancy Assumption | 0-5% | 5-10% |
| Expense Verification | Minimal | Detailed (insurance, taxes, management, maintenance, utilities) |
| Reserves | 3-6 months PITI | 6-12 months PITI |
| Non-Recourse | Rare | Available on loans above ~$1M |
| Closing Speed | 14-21 days | 21-30 days |
The most significant difference is the appraisal methodology. Residential appraisals rely on comparable sales. Commercial multifamily appraisals use the income approach, which values the property based on its net operating income and a market capitalization rate. This means the building's rent roll and operating expenses directly impact the appraised value and, consequently, your available loan amount.
The T12 (trailing twelve months) income and expense statement replaces the simple rent roll used in residential DSCR lending. Underwriters will review actual operating income and expenses over the past year to verify the building's financial performance. For newly constructed or recently renovated properties, a pro forma based on current leases and market data may be accepted.
You find an eight-unit apartment building fully leased at market rents with a clean trailing twelve months of income and expenses. The building generates a 1.35x DSCR. Because the property is stabilized with documented performance, underwriting is straightforward. You close at 80% LTV in 23 days, keeping capital in reserve for the next acquisition. No tax returns, no DTI, no income verification beyond the building's own financials.
You identify a six-unit building where the current owner has not raised rents in years. Units are renting at $900 per month when market rent is $1,300. You acquire the building using a bridge loan, renovate the units, and lease them at market rates. Once stabilized with a strong rent roll, you refinance into this permanent DSCR product at 75% of the new appraised value. The forced appreciation through renovations and rent increases has created significant equity, and you extract a portion through a cash-out refinance to fund your next project.
You used short-term financing to acquire a ten-unit building quickly. The bridge loan is maturing in six months, and you need permanent financing at a lower rate with a longer term. The building is stabilized with nine of ten units leased. This DSCR product provides a 30-year fixed-rate loan based on the building's current income, replacing your high-rate short-term debt with predictable long-term payments.
You completed construction of a twelve-unit apartment building and have leased all units over the past three months. Your construction lender requires a takeout within 90 days of certificate of occupancy. This product provides permanent financing based on the building's actual rental income, giving you a 30-year term at a competitive rate. The transition from construction loan to permanent hold is seamless, and no personal income documentation is required.
You are purchasing a building with two ground-floor retail spaces and eight apartments above. The residential units generate 65% of the building's gross income, well above the 51% threshold. The retail tenants have multi-year leases with strong payment history. Both income streams are factored into the DSCR calculation, and the building qualifies at 75% LTV with a 1.28x ratio.
Properties with five or more units are classified as commercial real estate regardless of their physical characteristics. This classification changes the appraisal methodology, underwriting standards, and regulatory framework. A standard residential DSCR loan is designed for one-to-four-unit properties. The 5-12 unit multifamily DSCR product is specifically structured for the commercial classification, with appropriate appraisal standards (income approach), reserve requirements, and documentation expectations. The core benefit remains the same — qualification based on property income rather than personal income — but the underwriting process accounts for the added complexity of commercial multifamily operations.
For stabilized properties with operating history, yes. The T12 is the primary document underwriters use to verify the building's financial performance. It shows actual rental income collected, vacancy losses, and operating expenses over the past twelve months. For newly constructed buildings or properties undergoing significant renovation, a pro forma income and expense projection based on current leases and market data may be accepted in place of historical financials.
Yes, provided that at least 51% of the building's gross income comes from residential units. A building with ground-floor retail and apartments above is a common configuration that qualifies. The commercial and residential income streams are both included in the DSCR calculation. Buildings where the majority of income is commercial (such as an office building with one apartment) would not qualify under this program.
Underwriters apply a vacancy assumption of 5-10% even if the building is currently fully occupied. This provides a conservative cushion in the DSCR calculation. For units that are vacant at the time of application, market rent as determined by the appraisal is used in the income calculation. If the building has a vacancy rate above the market norm, underwriters may apply a higher vacancy assumption or require the building to reach a minimum occupancy threshold before closing.
Both strategies have merits, and the answer depends on your investment goals. Small multifamily buildings typically offer better per-unit economics because operating costs (roof, foundation, landscaping, management) are shared across more units. Vacancy risk is diversified — losing one tenant in a ten-unit building has a much smaller impact than losing the only tenant in a single-family rental. However, multifamily acquisitions require larger down payments and the commercial classification adds some underwriting complexity. Many investors use both strategies, holding single-family rentals alongside small apartment buildings to balance their portfolio.
Yes. These are business-purpose loans specifically designed for entity ownership. You can close in the name of an LLC, corporation, or trust. In fact, entity ownership is the standard approach for commercial multifamily properties. It provides liability protection, simplifies tax reporting, and creates clean separation between your personal assets and your investment properties. There is no requirement to hold the loan in your personal name.
If you are exploring other financing options for your investment strategy, these related loan products may be relevant:
The five-to-twelve-unit segment offers some of the strongest risk-adjusted returns in real estate investing. Diversified income, shared operating costs, and growing renter demand make small apartment buildings a compelling addition to any investment portfolio. DSCR-based financing removes the documentation barriers and lets the property's performance speak for itself.
Get Pre-Qualified Now — Submit a short application and find out what terms are available for your multifamily acquisition or refinance. No tax returns, no W2s, and no income verification. Qualification is based on the building's cash flow, not yours.