An investor in Atlanta found a 64-unit apartment complex listed at $4.8M. Occupancy: 94%. Current NOI: $380K. Not a value-add play — this was a stabilized, cash-flowing asset in a growing submarket.
He structured the financing with SBA 504. 10% down — $480K. Monthly debt service: $28,000. Net cash flow after debt service: $3,700 per month. That doesn't sound like much until you factor in the equity buildup — $14K per month in principal paydown — plus depreciation that shields over $100K in annual income from taxes.
DSCR at those terms: 1.42x. Strong enough that three lenders competed for the loan. He picked the one with the best rate and closed in 35 days.
That's what stabilized multifamily looks like right now. Lenders want these loans.
Multifamily Is the Strongest CRE Sector — By Far
While office sits at 19.4% vacancy and retail continues to restructure, multifamily transaction volume jumped 39.5% year-over-year. People always need places to live. Remote work killed the office. E-commerce hurt retail. But apartments? Demand keeps growing.
Lenders know this. That's why you'll get more competitive terms on a stabilized apartment building than almost any other commercial real estate asset class. Multiple lenders will fight for a well-occupied apartment complex. They won't fight over your suburban office building.
Multifamily Financing by Property Size
The right loan product depends on your acquisition size and business plan:
| Property Value | Product | Down Payment | Rate | Term | DSCR Needed | Monthly Payment |
|---|---|---|---|---|---|---|
| $1M (8-unit) | Conventional | 25% | 7% | 25yr | 1.25x | $5,300 |
| $2.5M (30-unit) | SBA 504 | 10% | 6.5% | 25yr | 1.25x | $15,200 |
| $5M (64-unit) | Agency (Fannie/Freddie) | 20% | 6% | 30yr | 1.20x | $24,000 |
| $10M (120-unit) | CMBS/Bridge | 25% | 7.5% | 5-10yr | 1.25x | $72,000 |
The sweet spot right now is the $2M-$8M range. Big enough that you're getting institutional-quality financing, small enough that you're not competing with REITs and pension funds. SBA 504 at 10% down makes this range especially attractive.
DSCR: The Number That Matters Most
If you're buying multifamily, you need to know your DSCR cold. Every lender will calculate it. It's the first number they look at.
DSCR = Net Operating Income / Annual Debt Service
Here's the math on that Atlanta 64-unit:
- NOI: $380,000
- Annual debt service: $336,000 ($28K x 12)
- DSCR: $380,000 / $336,000 = 1.42x
What do those numbers mean in practice?
- Below 1.0x: You can't cover your loan payments. No lender touches this.
- 1.0x - 1.19x: Breakeven territory. Almost no conventional lender approves here.
- 1.20x - 1.24x: Agency minimum. You'll get a loan but not great terms.
- 1.25x+: Standard minimum for most lenders. You're in the game.
- 1.40x+: Strong. Multiple lenders compete. You pick the best offer.
Every dollar of NOI improvement moves your DSCR. Raise rents $50/unit across 64 units and you just added $38,400 to your NOI — which pushes your DSCR from 1.42x to 1.53x. That might drop your rate by 25 basis points.
Structure your multifamily financing.
See What You Qualify For →The $957 Billion Maturity Wall
Here's what nobody's talking about enough. Roughly $957 billion in commercial real estate loans originated in 2019-2021 are maturing in the next 24 months. Those loans were written at 3-4% rates. They're rolling into a 7%+ rate environment.
For multifamily owners, this means two things.
First, if you own a building with a maturing loan, your monthly payment is about to jump 40-80%. You need to refinance now, not when the maturity notice shows up. Run your numbers through the commercial funding calculator to see where you stand.
Second, if you're a buyer, distressed refinancing situations are creating acquisition opportunities. Owners who can't service the new payment are selling. Not at fire-sale prices — stabilized multifamily holds value — but at prices that reflect reality instead of 2021 optimism.
Here's What Most People Get Wrong
They focus on cap rate and ignore DSCR.
A 6% cap rate sounds great on paper. You're buying $380K of NOI for $4.8M. Solid return. But if you're financing 80-90% of that purchase, your DSCR is what determines whether you actually get the loan.
I've seen investors fall in love with a property's cap rate, put in an offer, start due diligence — and then find out their DSCR comes in at 1.05x because they overleveraged. No lender will touch it. Three months of due diligence costs wasted.
Run the DSCR math before you make an offer. Not after. You need to know what loan terms produce a 1.25x+ DSCR at your target purchase price. If the numbers don't work at 75% LTV, they probably won't work at 80%.
Bobby's Take
Multifamily is the one CRE sector where lenders are aggressively competing right now. If you have a stabilized property with 90%+ occupancy and 1.25x+ DSCR, you'll get multiple offers. That's exactly what capital stacking is built for — let lenders compete.
Office investors are sweating. Retail is mixed. Industrial is cooling. But apartments? Banks, credit unions, agency lenders, and CMBS shops all want apartment loans on their books. That means better rates, better terms, and more flexibility for you.
If you're sitting on the sidelines waiting for rates to drop, you're watching other investors buy the good stuff. Rates might come down. Or they might not. What I know for sure is that well-located, well-occupied apartment buildings are getting more expensive every quarter.
Frequently Asked Questions
What DSCR do I need for a multifamily loan?
Most lenders require a minimum 1.25x DSCR for stabilized multifamily. Agency lenders (Fannie Mae, Freddie Mac) sometimes go as low as 1.20x. A DSCR above 1.40x gets you the best rates and terms because lenders compete for strong loans.
Can I use SBA loans for apartment buildings?
Yes. SBA 504 works for multifamily properties up to about $5M with just 10% down. The catch: you typically need to occupy one unit or demonstrate that the property serves a community development purpose. For pure investment multifamily above $5M, agency or CMBS products are the better fit.
What's the minimum down payment for a multifamily loan?
It depends on the product. SBA 504 requires 10%. Conventional and agency loans require 20-25%. CMBS and bridge lenders typically want 25-30%. The lower the down payment, the higher your DSCR needs to be to compensate for the added leverage.
