DSCR Direct

Multifamily properties are the sweet spot for DSCR loans. More units generally means higher total rent, better DSCR ratios, and stronger cash flow. Whether you are buying a duplex or a 20-unit apartment building, DSCR loans are designed to finance income-producing multifamily properties based on cash flow alone.

How DSCR Works for 2-4 Unit Properties

For duplexes, triplexes, and fourplexes, the DSCR calculation combines all unit rents into one total. A duplex with two units renting at $1,200 each has $2,400 in monthly income. Divide that by the total PITIA payment to get the DSCR. Because multiple units spread vacancy risk, lenders view 2-4 unit properties favorably. If one unit is vacant, the other units still generate income. The DSCR calculation uses the total market rent for all units based on the appraisal.

Why Multifamily Properties Typically Have Higher DSCR Ratios

Multifamily properties often produce better DSCR ratios than single-family rentals because total rent scales faster than expenses. A fourplex might generate $5,200/month in total rent while the mortgage, taxes, and insurance are not four times a single-family property. Shared walls, one roof, one lot, and one insurance policy keep costs lower per unit. This cost efficiency translates directly into higher DSCR ratios and better qualification.

5+ Unit Properties: Small Commercial DSCR

Properties with 5 or more units are classified as commercial rather than residential. DSCR programs for 5+ units exist but differ from 1-4 unit programs in several ways. Appraisals are based on an income approach rather than comparable sales. Loan terms may include shorter amortization periods (25 years vs 30). Minimum loan amounts are often higher. However, the fundamental principle is the same - the property qualifies on its rental income. DSCR Direct has lenders that finance 5+ unit properties up to 50+ units.

Rate Differences by Unit Count

Rate adjustments for unit count are generally small. Single-family homes get the baseline rate. Duplexes and triplexes are priced similarly to single-family. Fourplexes may carry a small adjustment of 0.125-0.25% at some lenders. The 5+ unit commercial DSCR space has its own pricing that is competitive but structured differently. The bigger driver of your rate is FICO, LTV, and DSCR ratio rather than the number of units. More units often help because they improve the DSCR ratio.

Vacancy Factor Considerations

Some DSCR lenders apply a vacancy factor to multifamily properties - typically 5-10% of gross rent is deducted to account for turnover. This means if total rent is $5,000/month, the lender may use $4,500-$4,750 for the DSCR calculation. Not all lenders apply a vacancy factor, and it varies by unit count and market. This is another reason to shop across multiple lenders - the vacancy factor alone can swing your DSCR ratio meaningfully.

Mixed-Use Multifamily

Properties with both residential and commercial units (a storefront on the ground floor with apartments above, for example) can qualify for DSCR loans, though the commercial component usually needs to be less than 25-35% of the total space. Both residential and commercial rents count toward the DSCR calculation. These properties can be excellent investments with strong cash flow from the commercial tenant.

Finance Your Multifamily Deal

Run your multifamily scenario at dscrdirect.net. Select the appropriate property type and number of units, enter the total monthly rent from all units, and see rates from hundreds of lenders. For 5+ unit properties or unique situations, contact info@dscrdirect.net for custom pricing.