Commercial Multifamily Loans: A Guide for 5+ Unit Apartment Buildings
Once a building crosses five units, it stops being a residential loan and becomes commercial. The underwriting shifts from you to the building: its rent roll, its expenses, and its net operating income.
How Commercial Multifamily Is Underwritten
- Net operating income (NOI): rents minus operating expenses. This is the number everything is built on.
- DSCR: NOI divided by annual debt service. Lenders commonly want 1.20–1.25x or better.
- LTV: up to 75–80% on strong, stabilized properties.
- Sponsor: net worth, liquidity, and experience operating similar buildings.
Bridge vs. Permanent Debt
Bridge loans fund value-add plays — buildings with vacancy, deferred maintenance, or below-market rents. Short term, often with renovation funds, designed to be refinanced.
Permanent loans fund stabilized buildings. Fixed terms of 5–10 years are standard, amortized up to 30 years — and full-term interest-only is available on qualifying deals, which keeps cash flow strong for the whole hold.
Mixed-Use and New Construction
Retail-over-residential and other mixed-use buildings finance similarly, with the commercial space underwritten on its leases. Ground-up construction and development funds in draws released as each stage is completed, then converts or refinances to permanent debt at stabilization.
What to Send a Lender
- Current rent roll and trailing 12-month operating statement
- Purchase contract or current debt details
- Renovation budget and business plan (value-add)
- Sponsor resume and personal financial statement
Smaller Than 5 Units?
One-to-four unit rentals usually fit a DSCR loan. Own five or more single-family rentals? Consider a portfolio loan.
See the full program on our commercial multifamily loans page.
California Business Capital | Fresno, California | info@cabizfunding.com | 559-549-4717