Commercial Loans · 2 min read
Multifamily Financing for 5+ Unit Properties
Multifamily financing for 5+ unit properties: bridge, agency-style, bank and portfolio loans, plus NOI, DSCR and value-add strategy.
This guide is part of our Commercial Real Estate Loans hub.
Once a property has five or more units, it moves from residential to commercial financing. Underwriting shifts toward the property’s income, and the loan options change.
Why 5+ units is different
Lenders underwrite apartments on net operating income (NOI) and debt service coverage rather than comparable home sales. Your experience, the rent roll and the operating history matter more than your personal income.
Main financing options
- Bridge loans: for value-add or underperforming properties. See commercial bridge loans explained.
- Agency-style loans: long-term debt for stabilized properties, generally with strict occupancy and income requirements.
- Bank and credit union loans: often shorter terms with recourse, sometimes more flexible on smaller properties.
- Portfolio and debt-fund loans: flexible structures for properties that do not fit standard boxes.
Key underwriting numbers
- NOI: income minus operating expenses, before debt service.
- DSCR: NOI divided by annual debt service. Lenders commonly look for 1.20 to 1.25 or higher on stabilized assets.
- LTV: loan amount compared to appraised value.
- Debt yield: NOI divided by loan amount, used by some lenders as an extra check.
- Occupancy: stabilized programs often require sustained high occupancy.
Value-add strategy
A common path is to buy an underperforming building with bridge debt, renovate units, raise rents and improve operations, then refinance into long-term debt once NOI has grown. The plan only works if the stabilized NOI supports the refinance at the lender’s DSCR.
Getting ready
Gather the rent roll, T12 and your track record first. Our commercial loan documents checklist covers the rest.
Related guides
Explore the full hub: Commercial Real Estate Loans. Other financing: Fix and Flip & Hard Money Loans · DSCR & Long-Term Rental Loans · Unsecured Business Loans · Trust Deed Investing.
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Terms, leverage and timelines vary by lender, property and borrower qualifications. This article is general information, not financial, legal or investment advice, and not a commitment to lend.