5-10 Unit DSCR Loan

How this structure works

Buildings with five or more units have traditionally been financed with commercial loans, which can involve detailed operating statement analysis, balloon terms, and lengthier timelines. A 5-10 unit DSCR program brings these smaller buildings into a process that more closely resembles residential investor lending.

The coverage test is similar to a standard DSCR loan: qualifying rent for the whole building compared with the monthly payment, taxes, insurance, and other housing expenses. Many wholesale lenders offer long-term amortizing structures for these properties, though available terms vary.

Who it tends to fit

This structure is commonly used by investors moving from single-family and duplex rentals into their first small apartment building. It can also fit experienced owners who prefer the simpler documentation of a DSCR loan over a full commercial review.

Some investors use it to consolidate. Rather than holding several separately financed small rentals, they acquire one building with a single loan, a single insurance policy, and a single property to manage.

• Investors buying a first five-to-ten unit building
• Owners refinancing a stabilized small multifamily property
• Buyers who prefer residential-style documentation
• Portfolio investors consolidating several units under one roof

How qualification is usually evaluated

Income is typically documented with a current rent roll and copies of existing leases. The appraisal for a building of this size often includes an income analysis and market rent estimates, which the wholesale lender uses to confirm or adjust the qualifying rent.

Some lenders apply a vacancy or expense factor, and some look for a higher minimum ratio than on one-to-four unit properties. Credit is reviewed, reserves are verified, and prior experience owning or managing rental property may be considered.

Where the rent roll and the appraiser's market rent differ, wholesale lenders take different approaches. Some use the lower figure, some allow in-place rents supported by bank deposits, and some average the two. Vacant units are usually counted at a conservative market estimate or excluded until leased.

Property and borrower considerations

Eligible buildings are generally residential in character. Mixed-use properties with a commercial storefront may be accepted by some wholesale lenders under specific limits and excluded by others. Property condition matters, and buildings with deferred maintenance or high vacancy may need to be stabilized first.

These loans are business-purpose financing for non-owner-occupied investment property. They are not used to finance a building in which the borrower lives.

Borrowers commonly vest title in an LLC or other entity for buildings of this size. Wholesale lenders that allow entity vesting typically ask for formation documents and a personal guarantee from the principal owners.

Trade-offs to weigh

The streamlined approach can mean faster processing than a full commercial loan, but leverage is often more limited than on one-to-four unit DSCR loans. Appraisals for small multifamily properties can take longer and cost more, and fewer wholesale lenders participate in this segment.

Investors should also consider how insurance, utilities, and management costs scale with the unit count, since those expenses affect both the qualifying ratio and real-world cash flow.

Prepayment terms deserve attention as well. Small multifamily loans may carry prepayment structures that differ from one-to-four unit DSCR loans, which matters for investors who expect to reposition and sell or refinance within a few years.

How we shop it

We arrange and shop financing from wholesale lenders that offer 5-10 unit programs, comparing minimum ratios, vacancy assumptions, mixed-use allowances, leverage, and prepayment structures.

We help assemble the rent roll and lease package before submission to keep the file organized. All terms are subject to underwriting and lender/investor approval.