DSCR Financing 5 - 8 Unit Multi Family Apartment
Multi-Family apartment buildings 5 or more units are zoned Commercial and therefore fall under commercial loan guidelines. Commercial loans are full documentation with a full income analysis, making it hard at times for investors to get into 5 plus units.
Recently DSCR (Debt Service Coverage Ratio) for residential properties has been the talk, you probably have seen most loan officers market the heck out of these in recent months! It's been a great alternative that some lenders have expanded their DSCR to 5 - 8 Apartment Units. Making it accessible for investors.
It has some of the same guidelines that DSCR for residential properties for 1-4 units, but it also has some similarities to a commercial transaction, one of them being a lower loan to value.
So what's the difference between a DSCR loan for 5 - 8 units and a Traditional Commercial Loan?
The main difference is the terms, DSCR terms are 15 and 30 years fixed and 30 and 40-year interest only options, there is more leniency as to Minimum Credit scores, Vacant units, and DSCR coverage.
Commercial loans are typically shorter terms with a balloon payment at the end of the term and are more strict regarding the cash flow and investor/owner finances/assets.
Nelson Arevalo
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#2 Innovative Strategies Contributor
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@Nelson Arevalo thanks for the insight. I did not know that 5-8 unit DSCR loans were readily available.
@Don Konipol..yea, they are. They're more expensive but the underwrite is easier due to gross rents vs. having expense factors (like any type of normal commercial lender). Some lenders will do them up 10 units at this time.
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#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Great post, Nelson - can be confusing especially when just starting out and looking for different means of financing
Can anyone share contact info for DSCR lenders that would do a 10 unit in Pennsylvania ?
Sure, I have one
Quote from @Elvin Morales:Hey Elvin
Can anyone share contact info for DSCR lenders that would do a 10 unit in Pennsylvania ?
I could help I sent you a message
@Elvin Morales can assist. pm sent
Hello. Looking for a DSCR on a 6 unit in Chicago.
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@Tim Flickinger I am happy to refer you someone. I can send you there info via a DM
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Hi, also looking for a dscr loan for an 8 unit, can you message me the referral as well? Thanks
Quote from @Rocco Guarino:
Hi, also looking for a dscr loan for an 8 unit, can you message me the referral as well? Thanks
Just sent you a message
@Rocco Guarino Happy to take a look at 8 unit. PM sent
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#1 Private Lending & Conventional Mortgage Advice Contributor
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Since this thread got recently bumped - sharing the BiggerPockets fully published article last year all about this type of loan (Multifamily DSCR)
