California 5-10 unit DSCR loan questions, answered
TL;DR: Yes, a 5-10 unit California building can often be financed on its rents with a DSCR-style or small-balance loan, as long as every unit is rented to tenants. Lenders read the rent roll against California’s rent rules and your post-sale tax bill. The questions below cover qualifying, occupancy, state rules and how we work.
Qualifying a 5-10 unit building
Can I use a DSCR loan on a 5-unit building in California?
Often, yes. Some wholesale programs extend DSCR-style underwriting to five-plus residential units, and others treat these buildings as small-balance commercial loans. Either way, lenders want a current rent roll, leases, an operating statement and an appraisal with a multifamily income approach. Every unit has to be rented to tenants. None can be owner-occupied.
What DSCR do I need for a 5-10 unit apartment building?
There is no single number. Each wholesale lender sets its own minimum coverage, and it can change with unit count, location, condition and loan size. Some lenders also test net operating income. Run the building in our calculator and send the rent roll so we can compare it with programs that fit.
Why is five units a different loan than four?
Residential lending rules end at four units. At five, most lenders move the file into a multifamily or commercial lane, which means a unit-by-unit rent roll, operating history, an income-approach appraisal and fewer participating programs.
Do lenders use my personal income on a 5-10 unit DSCR loan?
Usually not to qualify. The building’s rents carry the loan. Lenders still review credit, reserves and your experience with rental property, and some ask about other properties you own.
Can I get a DSCR loan on a 5-10 unit building in an LLC?
Usually, yes. Many wholesale programs lend to LLCs, often with a personal guaranty from the members. Bring the operating agreement, articles and EIN letter. Each lender has its own entity document checklist.
Occupancy and building type
Can I live in one unit of my 6-unit building and still use this loan?
No. These programs are for business-purpose, non-owner-occupied property only, and every unit has to be rented to tenants. If you or a family member will live in the building, you need a different financing path, and we do not arrange owner-occupied loans.
Do you arrange loans on mixed-use buildings with a storefront?
Sometimes. Some programs accept limited commercial space in a mostly residential building, and others do not. Send the square footage and lease details for the commercial space with your scenario, and we will tell you which programs consider it.
Can I finance a 5-10 unit building that is half vacant?
Usually not with a long-term rent-based loan, because there is no rent roll to size against. A bridge loan to lease up first, then a refinance into a DSCR loan, is a common path.
Do unpermitted units count toward the unit count or the rent?
Generally no. Most lenders will not count rent from unpermitted units, and some will not lend until those units are legalized or removed. Permitted ADUs can count.
California rules
Does California’s rent cap affect how lenders underwrite my building?
It can. The Tenant Protection Act (Civil Code § 1947.12) limits annual rent increases on most covered housing more than 15 years old, and local rent control can be stricter. Lenders and appraisers usually size today’s in-place rents, not your planned increases.
Will the lender count the higher rents I plan to charge after renovations?
Usually not at first. Lenders generally use in-place rents and market rent from the appraisal. In California, increases for existing tenants are also limited by the Tenant Protection Act and any local ordinance. Many investors refinance after the higher rents are actually in place.
Does Costa-Hawkins mean my building is exempt from local rent control?
Not necessarily. Costa-Hawkins (Civil Code § 1954.50 et seq.) generally limits local rent stabilization for buildings with a certificate of occupancy issued after February 1, 1995. Older buildings may still be covered, and the statewide cap can still apply. Have counsel confirm your building’s status.
How does Prop 13 affect the numbers on a building I am buying?
A purchase is generally a change in ownership, so the county reassesses the property to market value and may send a supplemental bill. Base the tax figure in your DSCR estimate on the new assessed value, not the seller’s current bill.
Do lenders ask about soft-story seismic retrofits?
Yes, in cities with mandatory programs. Have the completion sign-off, or the scope, cost and deadline if the work is still open.
Working with us
Are you a lender?
No. Loan Daddy LLC is a mortgage broker. We arrange and shop financing from wholesale lenders. The lender underwrites, approves and funds the loan under its own guidelines.
Do you publish rates for 5-10 unit loans?
No. Pricing comes from wholesale lenders, depends on the building and your profile, and changes. We do not publish a starting rate. The calculator leaves the rate blank for you to enter.
What documents should I have ready?
A unit-by-unit rent roll, leases, a trailing operating statement (often 12 months), the property tax bill, an insurance quote, the purchase contract or current loan statement, and entity documents. In rent-controlled cities, add the registration or rent board records.
What if my building is a fourplex or a single-family rental?
This site covers 5-10 unit buildings only. For all California DSCR options, including single-family and 2-4 unit rentals, see dscrloancalifornia.com.
Send us the building, not just the borrower
Address, unit count, a current rent roll and the loan you have in mind. We read it the way a 5-10 unit underwriter will and tell you which wholesale programs are worth the appraisal.