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How to Finance a 5–10 Unit Apartment Building

Step-by-step guide to financing a 5–10 unit apartment building in the US—products, underwriting, and common mistakes when crossing the commercial lending threshold.

By Multi-Family USA Editorial Team Reviewed by Scott Dillingham Updated 10 min read

Financing 5–10 unit apartment buildings

Properties with five to ten units cross the commercial multifamily threshold. Financing shifts from residential mortgage logic to property-level underwriting on normalized NOI, DSCR, debt yield, and sponsorship depth.

Step 1 — Confirm commercial treatment

Verify unit count, income mix, and local lender treatment. Mixed-use properties may still require commercial underwriting when five or more units drive economics.

Step 2 — Normalize NOI and size debt

Build in-place NOI from trailing operations. Use the loan sizing calculator to test DSCR, debt yield, and LTV constraints. Small buildings often bind on DSCR or debt yield before headline LTV targets.

Step 3 — Choose a realistic product path

Stabilized 5–10 unit assets may fit local bank or agency grids when size minimums are met. Value-add paths often start with bridge debt and refinance after stabilization. Avoid assuming residential DSCR programs apply.

Step 4 — Set up entity and guarantor package

Commercial lenders expect LLC borrowers and guarantor financials. Review entity structure for multifamily borrowing before application.

Step 5 — Run parallel quotes with clear assumptions

Submit the same NOI bridge and rent roll to two or three lender types. Compare proceeds and covenants, not rate alone.

Next steps

Read five-plus unit financing basics and the apartment building loan guide.

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Frequently asked questions

Is a 5–10 unit building considered commercial?
Yes. Properties with five or more units are generally underwritten as commercial multifamily. Debt is sized from property NOI, DSCR, and debt yield—not residential 1–4 unit guidelines.
What loan types fit small apartment buildings?
Small commercial multifamily may use bank balance sheet, credit union programs where available, bridge for value-add, or agency when size and stabilization meet grid minimums.
Do agency lenders finance 5–10 unit properties?
Sometimes, when stabilized NOI, occupancy, and loan size meet agency program minimums. Smaller deals often start with local bank or bridge paths.
What documents should I prepare?
Rent roll, T12 or trailing operating statements, entity documents, guarantor financials, and normalized NOI bridge—even for smaller buildings.
How much equity is typically required?
Leverage varies by product and sponsor. Many executions target roughly 25%–35% equity, but binding metrics determine actual proceeds.
What is the biggest mistake first-time buyers make?
Treating 5–10 unit deals like residential rentals—ignoring commercial DSCR, debt yield, entity setup, and third-party report requirements.
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