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Multifamily financing

DSCR Loans for Apartment Buildings

DSCR decides how much a lender will put on an apartment building. Here is the formula, how DSCR loans are sized on 2 to 4 and 5+ unit buildings, and how today's Georgia asks hold up.

DSCR = NOI / annual debt service. Most apartment lenders want about 1.25x: $1.25 of net operating income for every $1.00 of mortgage payment. A DSCR loan is sized on the building's income, not your personal income. On active Georgia apartment listings (5+ units), the median DSCR at the asking price is 0.89x n=16, and 19% clear 1.25x with 30% down at 7% over 25 years.

0.89x
Median DSCR at ask, Georgia 5+ units n=16
19%
5+ unit asks clearing 1.25x n=16
0.88x
City of Atlanta 2+ units n=50
0.90x
Georgia 2 to 4 units n=129

Active FMLS listings with usable rent data, October 2026. Listing-reported rents, standardized expenses, at full asking price. 5+ units: 30% down, 7%, 25-year amortization. 2 to 4 units: 25% down, 7%, 30-year amortization. Not a loan quote.

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The DSCR formula

DSCR = net operating income / annual principal and interest. NOI is before the mortgage (see how to calculate NOI on an apartment building). Debt service is twelve monthly payments. Below 1.0x the building does not cover its own mortgage. At 1.25x there is a 20% cushion: NOI could fall by a fifth and still pay the loan.

How lenders size a DSCR loan

Lenders lend the lesser of two numbers: the loan the NOI can carry at their DSCR floor, and the loan allowed by loan-to-value. On most Georgia apartment deals at today's rates, the DSCR side is the one that binds.

Underwritten NOI$70,000
Required DSCR1.25x
Max annual debt service (NOI / DSCR)$56,000
Loan constant at 7.00%, 25-year amortization8.48%
Max loan on DSCR$660,000
Max loan on LTV (75% of $1,000,000)$750,000
Loan offered (lesser of the two)$660,000
Down payment needed$340,000 (34%)

A $1,000,000 building with $70,000 of NOI is a 7.0% cap. At these terms the lender stops at about $660,000, so the buyer needs about 34% down, not 25%. Change any input on the DSCR calculator to see your own number.

DSCR loan options by building size

2 to 4 units

Still residential lending. Owner-occupants can use conventional, FHA or VA loans and count part of the rent. Investors often use a DSCR loan (a non-QM investor product) that qualifies on the property rent instead of personal income. Expect a higher rate than conventional, a DSCR floor of roughly 1.0x to 1.25x depending on the lender, and better pricing at higher coverage. Browse duplexes for sale in Georgia and fourplexes for sale in Georgia.

5+ unit apartment buildings

Commercial loans, always sized on DSCR and loan-to-value:

  • Local banks and credit unions: the most common source for small Georgia apartment buildings. Often 5 to 10 year terms on a 20 to 25 year amortization, recourse, and a 1.20x to 1.35x floor.
  • Agency small loans (such as Fannie Mae small loan programs through approved lenders): longer fixed terms and non-recourse options for stabilized buildings, with minimum loan sizes and occupancy history requirements.
  • Private and bridge lenders: for buildings that do not cover yet (vacancy, renovation). Higher rates, shorter terms, sized on a plan to reach DSCR.
  • Seller financing: common on Georgia buildings with older owners and low basis. It can bridge a DSCR gap the bank will not.

Side by side, with down payments and terms for each: multifamily and commercial financing options.

Browse apartment buildings for sale in Georgia and apartment buildings for sale in Atlanta, each with a live DSCR benchmark. Smaller deals start with multifamily investment properties in Georgia, and congregations can see how lenders apply the same coverage test to churches for sale in Georgia and commercial properties for sale in Georgia, usually at a higher coverage ratio. Lenders treat land for sale in Georgia differently because it has no income to cover, and a signed lease from commercial space for lease in Georgia is what turns a building into income a lender can size. Send me the listing and I will size the loan with you.

How Georgia asks hold up on DSCR

Run every screenable FMLS listing at full ask with the same loan terms and most do not cover 1.25x. Georgia 5+ units: median 0.89x (n=16), 19% clear 1.25x. Core Metro Atlanta: 0.89x (n=105), 13% clear. Outside Core Metro: 0.98x (n=40), 25% clear. That is the gap between where sellers price (see apartment cap rates in Georgia) and what a lender will finance at today's rates. It is also where negotiation, more equity or seller financing comes in.

These are asks, not closed loans. Rents are listing-reported and expenses are a standardized screen; lender NOI is usually lower.

How to size a DSCR loan, step by step

  1. Underwrite NOI the way the lender will. Start from the T-12 and rent roll, then add vacancy, management, reserves and property tax at your price.
  2. Divide NOI by the DSCR floor. Max annual debt service = NOI / required DSCR (for example 1.25).
  3. Convert payment to loan amount. Divide max annual debt service by the annual loan constant for the rate and amortization.
  4. Check loan-to-value. The lender lends the lesser of the DSCR loan and price x max LTV. Whichever is lower sets your down payment.
  5. Stress the rate. Re-run at a rate 0.5 to 1 point higher. If the deal only works at today's quote, you have no cushion.

Run DSCR and the loan on a real building

Questions buyers ask

What is DSCR on an apartment building?

Debt service coverage ratio is net operating income divided by annual debt service (principal and interest). A DSCR of 1.25x means the building earns $1.25 of NOI for every $1.00 of mortgage payment.

What DSCR do lenders require for apartment buildings?

Many lenders on 5+ unit apartment loans look for about 1.20x to 1.35x, with 1.25x the common benchmark. Investor DSCR loans on 2 to 4 unit buildings often accept about 1.0x to 1.25x, with better pricing at higher coverage. Every lender sets its own floor, so get the number in writing.

What is a DSCR loan?

A DSCR loan qualifies the property, not your personal income. The lender sizes the loan on the building rent and NOI instead of your tax returns. The term is used most for 1 to 4 unit investor loans, but bank, credit union and agency loans on 5+ unit apartment buildings are underwritten on DSCR as well.

Can I get a DSCR loan on a 5+ unit apartment building?

Yes. Buildings with 5 or more units are commercial loans. Local banks and credit unions, agency small-balance programs and some private lenders all size these on DSCR and loan-to-value, usually with 20% to 35% down and a 20 to 30 year amortization.

Why do so many Georgia apartment listings fail the 1.25x test?

At current rates, many asks are priced on cap rates below the cost of debt. On active FMLS listings (October 2026), only 19% of 5+ unit buildings clear 1.25x at the asking price with 30% down at 7%. Buyers close that gap with a lower price, more equity, seller financing, or rent growth they can prove.

Which NOI does the lender use?

The lender underwrites its own NOI from the trailing 12 months and rent roll, usually with a management fee, a vacancy factor and replacement reserves even if the seller does not show them. That NOI is often lower than the listing NOI.

Jeff Crowe, CENTURY 21 The Avenues. Figures are screening estimates from active FMLS listings, not appraisals, closed-sale comps or loan quotes. Listing data is provided by the listing brokers and is not verified. Confirm rents, expenses and terms with a T-12, rent roll and a lender.