5-10 unit multifamily DSCR loans finance small apartment buildings on the property’s rental income — no tax returns, no personal DTI test. Just past the 1-4 unit residential line, these buildings underwrite on net operating income with a commercial flavor, but qualify on the same cash-flow logic as any DSCR loan.
In one sentence: a 5-10 unit multifamily DSCR loan qualifies a small apartment building on its blended net operating income against debt service, not the borrower’s personal income. New to the terms? See the DSCR loan glossary.
Jaken Finance Group finances small multifamily investment property nationwide, matching residential-style DSCR to buildings that sit at the edge of commercial.
Where 5-10 unit fits
The unit count changes how the property is underwritten:
| Property size | Underwriting | Typical DSCR basis |
|---|---|---|
| 1-4 units | Residential DSCR | Gross rent ÷ PITIA |
| 5-10 units | Small multifamily DSCR | NOI ÷ debt service |
| 10+ units | Commercial DSCR | NOI ÷ debt service |
At five or more units the lender looks at the building’s net operating income — total rent minus operating expenses — rather than raw gross rent, then divides by debt service. It is still DSCR; the income just gets a more thorough scrub.
Key terms at a glance
- 5-10 unit buildings — small multifamily
- NOI-based DSCR — income net of operating expenses
- LTV typically 70%-75% on purchase
- Target DSCR 1.20-1.25+
- Commercial-style reserves — often 6+ months
- No personal income docs — qualifies on the building
Loan parameters at a glance
These are the ranges a clean 5-10 unit file typically works within. Every number moves with the building’s coverage, your credit, and market — but this is the shape of the box:
| Parameter | Typical range |
|---|---|
| Loan amounts | ~$250,000 to $3,000,000+ |
| LTV — purchase | up to 70%-75% |
| LTV — rate/term or cash-out refinance | ~65%-70% |
| Minimum DSCR | 1.20x-1.25x |
| Rates | 5.75%-10.5%, driven by leverage, DSCR, and credit |
| Reserves | 6+ months PITIA |
| Amortization | 30-year, with interest-only available on some programs |
| Prepayment | step-down structures common (e.g., 5/4/3/2/1) |
| Close speed | ~14 business days on a complete file |
| Vesting | individual or LLC — an LLC is common for liability and portfolio structuring |
Higher DSCR and lower LTV pull pricing toward the bottom of that rate band; thin coverage, cash-out, or a lighter credit profile push it up. For the full documentation checklist, see the DSCR loan requirements guide.
How the building’s NOI is built
On a 1-4 unit file the shortcut is gross rent over PITIA. At five units the lender stops taking gross rent at face value and rebuilds it into net operating income. The path looks like this:
- Gross scheduled rent — the rent roll’s in-place rent across all eight or so units, checked against leases and market rent from the appraisal.
- Less vacancy and credit loss — a factor (often 5%) is subtracted even if the building is fully occupied today, because underwriting prices in turnover.
- Less operating expenses — property taxes, insurance, utilities the owner pays, water and sewer, trash, repairs and maintenance, and turnover costs.
- Less a management factor — a management line (commonly 4%-6% of collected rent) is deducted whether or not you self-manage, since the underwriter values the building as if a third party runs it.
What remains is NOI. Across small multifamily, that scrub usually lands the expense ratio somewhere around 35%-45% of gross rent — older buildings, owner-paid heat, and heavy turnover push it higher. NOI divided by annual debt service is your DSCR, and that ratio, not gross rent, is what clears the file.
How 5-10 unit underwriting differs from 1-4 unit DSCR
If you have closed residential DSCR loans before, these are the shifts to expect once you cross into small multifamily:
- Income is net, not gross. Expenses and a management factor come out before coverage is measured — a building can carry strong gross rent and still fall short on NOI.
- Leverage is a notch lower. Expect 70%-75% at purchase rather than the 80% some 1-4 unit programs reach, with cash-out lower still.
- Reserves are commercial-style. Plan on 6+ months of PITIA in liquid reserves, more than a typical single-family DSCR.
- The appraisal digs deeper. The valuation leans on the income the building produces, so a supportable rent roll matters as much as comparable sales.
- Documentation grows. A current rent roll, leases, and a trailing operating history support the file even though your personal tax returns still do not.
Worked example: an 8-unit building
An $850,000 eight-unit building:
| Line | Amount |
|---|---|
| Purchase price | $850,000 |
| Down payment (30%) | $255,000 |
| Loan amount (70% LTV) | $595,000 |
| Gross rent (8 units) | $9,600/mo |
| Operating expenses (~35%) | −$3,360/mo |
| Net operating income | $6,240/mo |
| Debt service at 70% LTV, ~8.0% | ~$4,366/mo |
| DSCR | ~1.43 |
The building’s NOI clears comfortably above a 1.25 floor, qualifying the file on cash flow alone. Model your building on the DSCR calculator and scrub expenses conservatively.
Second example: cash-out refinance on a 6-unit
DSCR also unlocks trapped equity. Here a stabilized six-unit is refinanced to pull cash, so the LTV is held tighter and coverage carries the file:
| Line | Amount |
|---|---|
| Appraised value | $780,000 |
| Loan amount (65% cash-out LTV) | $507,000 |
| Gross rent (6 units) | $7,500/mo |
| Vacancy + operating expenses (~38%) | −$2,850/mo |
| Net operating income | $4,650/mo |
| Debt service at ~8.0% | ~$3,720/mo |
| DSCR | ~1.25 |
Even after pulling equity, coverage sits right at a 1.25x floor because the cash-out leverage was held to 65%. Push the loan higher and DSCR erodes fast — which is exactly why cash-out caps run below purchase LTV.
Common mistakes to avoid
The files that stall usually trip on the same points:
- Using gross rent instead of NOI. A building can look strong on gross rent and still miss coverage once expenses and management come out. Underwrite on NOI from the start.
- Understating expenses. Leaving out water, trash, or a management factor inflates NOI and produces a DSCR that collapses at underwriting. Model expenses at 35%-45% until the T-12 says otherwise.
- Ignoring the management factor. Self-managing does not remove the deducted management line — the lender still books it.
- Thin reserves. Coming up short on the 6+ months PITIA requirement stalls otherwise-strong files.
- Maxing leverage on cash-out. Cash-out LTV runs below purchase; assuming 75% on a refinance breaks the structure.
- Skipping the rent roll and leases. Missing or inconsistent lease documentation is a top cause of re-underwriting.
Own several buildings? A blanket portfolio DSCR loan consolidates them into one note with a blended ratio and a release clause. Not sure which product fits? Start with what kind of loan you need.
Get a small multifamily DSCR quote
Jaken Finance Group will underwrite the building’s NOI and structure the leverage that works. Send us the rent roll and expenses, and we will price the file. Buildings above ten units move to our 10+ unit multifamily DSCR and commercial programs.
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Small multifamily DSCR terms, LTV caps, expense assumptions, and pricing vary by lender and building; figures here are illustrative rather than a rate sheet. Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. All loans are subject to full underwriting. Jaken Finance Group only finances non-owner-occupied investment properties.